Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

FRIENDS' PROVIDENT LIFE OFFICE BILL

LONDON TRANSPORT (ADDITIONAL POWERS) BILL

Read the Third time and passed.

EASTBOURNE HARBOUR BILL [Lords]

(By Order)

Order for consideration, as amended, read.

To be considered upon Tuesday next.

Oral Answers to Questions — DEFENCE

Communications and Supply Routes

Mr. Biggs-Davison: asked the Secretary of State for Defence whether he will make a statement on the protection of the United Kingdom's overseas communications and supply routes.

The Secretary of State for Defence (Mr. Roy Mason): It is no longer possible for the United Kingdom to maintain a global military presence as in the past, but the Royal Navy will retain the ability to deploy world-wide in defence of national interests and in co-operation with our allies. Our maritime contribution to NATO will mainly be in the Eastern Atlantic and Channel areas and it is in these areas that the vital supply and reinforcement routes to Britain and the rest of Europe are concentrated.

Mr. Biggs-Davison: Considering the developments in the Iberian peninsula, the Mediterranean and further east, and considering moreover the Government's proposal to abandon the Commonwealth

and other allies, with what forces and from what bases will co right hon. Gentleman be able to meet the growing threat to our supply routes?

Mr. Mason: If the hon. Gentleman is referring to east of the Cape, he knows full well that talks have begun about the future of Simonstown and we hope to continue using it on a customer basis. We shall also have the facilities of Diego Garcia in the Indian Ocean. We have the facility to deploy world-wide and we shall still have a presence as far as Singapore.

Rear-Admiral Morgan-Giles: Can the Secretary of State tell the House how the Royal Navy will be able to deploy worldwide without the use of the maritime Harrier?

Mr. Mason: It does not need a maritime Harrier to propel a ship around the world.

Scotland

Mr. Dalyell: asked the Secretary of State for Defence how many defence establishments there are in Scotland; and how many of Her Majesty's Forces are stationed in Scotland.

The Minister of State for Defence (Mr. William Rodgers): On 1st January 1975 there were some 270 defence establishments in Scotland at which 17,310 Service personnel were stationed.

Mr. Dalyell: Do not these facts make talk of a separate Scottish army, navy and air force absurd?

Mr. Rodgers: Indeed they do, but many other facts point in exactly the same direction.

Mr. Alexander Fletcher: Will the Minister take this opportunity to express his appreciation to the troops who have cleared thousands of tons of rubbish from the streets of Glasgow? Will he also express his appreciation to the Army for helping to defend what is left of the social contract?

Mr. Rodgers: Notwithstanding the hon. Gentleman's final oblique remark, his kind comments on the work of the Army in Glasgow will be much appreciated, as the Army's work was appreciated by the people of Glasgow.

Mrs. Bain: Can the Minister give an indication to the House of how many of the establishments are nuclear bases and how many of the jobs are attached to nuclear bases? Will he at the very least give a commitment to the people of Scotland that there will he no further proliferation of nuclear bases on the soil or in the waters of Scotland?

Mr. Rodgers: The issue of nuclear bases does not arise directly from this Question. Certainly the majority of the 270 defence establishments in Scotland are concerned with non-nuclear matters.

NATO (Expenditure)

Mr. Brotherton: asked the Secretary of State for Defence what is the expenditure on defence in all NATO countries expressed as a percentage of the gross national product and on a per capita basis.

Mr. Mason: I refer the hon. Member to the table at page 3 of the 1975 Statement on the Defence Estimates.

Mr. Brotherton: Do not these figures show that only the Governments of Portugal, Greece, Turkey and Italy spend markedly more on defence on a per capita basis than does the United Kingdom? Does not this make nonsense of the statement in the defence review that the burden of defence expenditure should be brought more into line with that of our major allies in Europe? Is not the real reason for the cuts in defence that the Government require a sop, albeit an unsatisfactory one, for their hon. Friends below the Gangway?

Mr. Mason: No, Sir. We decided, and our NATO allies appreciated, that if we were to look at defence expenditure per nation within NATO we should look at the NATO statistics, which show defence expenditure as a percentage of the gross national product. On that basis, in 1974 the percentage for the United Kingdom was 5·8, for France it was 3·8 per cent. and for Germany it was 4·1 per cent. The hon. Gentleman must realise that we cannot draw true comparisons on a per capita basis because we maintain a professional army and air force, whereas the forces of most of the countries he mentioned contain conscripts. Therefore, the parallel is not exact.

Mr. Younger: Surely the right hon. Gentleman will agree that the qualification he has just made about the effect of different systems of operating forces is equally valid for the GNP. Does it not make nonsense of that also?

Mr. Mason: No, Sir, because I prefaced my reply by saying that it is recognised within NATO that we should use the NATO definitions of expenditure on defence, and it was from the NATO tables that we started our examination.

Mr. Goodhew: If the right hon. Gentleman wishes to ensure the security of the nation, would he not do better to apply his mind to comparisons with the expenditure of our potential enemies rather than our allies?

Mr. Mason: Of course, it is always necessary to do that. But Great Britain belongs to an alliance. Therefore, we are looking at the collective defence expenditure and efforts of the alliance compared with those of potential enemies.

BAOR (Television)

Mr. Blaker: asked the Secretary of State for Defence if he will make a statement about the progress of plans for transmitting British television programmes to the British Forces in Germany.

The Under-Secretary of State for Defence for the Army (Mr. Robert C. Brown): Contracts for the London Control Centre, the interim studio and transmitting equipment have been placed or are being negotiated. An interim recorded service consisting of a balanced mixture of British programmes should be available to about 17,000 Service men and their families in the Celle area by Christmas this year and will be gradually extended to cover all troops in West Germany during the following two years. From 1978 all programmes will be broadcast direct from this country.

Mr. Blaker: Is the hon. Gentleman aware that there will be a general welcome for the fact that the Government propose to proceed with the project, planning for which was begun under the Conservative Government? The project is very important for the morale of our forces in Germany and their families. Can the Minister yet say whether the full programme will include extracts selected


from both the BBC and the independent television services?

Mr. Brown: Everyone will agree that the project is valuable for the morale of our troops and their wives and families. The service will be a balance of the BBC programmes and the ITV programmes.

Mr. Ronald Atkins: As the British troops in Germany cost the British taxpayer more than £400 million a year, three-quarters of that sum in German marks, would it not be better to transmit the troops back to Britain unless a suitable offset agreement is concluded with Germany?

Mr. Brown: The question of an offset agreement does not arise from the question, and the transmission of troops back to this country does not arise either. We are firmly committed to NATO. As my right hon. Friend the Secretary of State has said more than once in the House recently, NATO is the linchpin of our defence policy.

Gurkhas (Family Remittances)

Mr. Hal Miller: asked the Secretary of State for Defence what is the present level of family remittances by Gurkha troops serving in the British Army; and what is the estimated decline in their volume following the reduction in strength announced in the defence review.

Mr. Robert C. Brown: Under family remittance facilities provided by the Brigade of Gurkhas an average of about £39,000 is sent home monthly, but these facilities are not used by all Gurkhas, some of whom choose to provide for their families in other ways. Since it is not possible at this stage to say exactly how the reductions in the Brigade of Gurkhas will be effected, I cannot predict the effect which such reductions will have on the level of Gurkhas' remittances home.

Mr. Miller: Does the Minister accept, however, that the Gurkha remittances play a vital part in the economy of certain parts of Nepal? Will he give that factor consideration when considering the necessity or otherwise of Gurkha cuts, particularly as the Sultan of Brunei is willing to pay for the Gurkha battalion?

Mr. Brown: As I said in my original answer, I cannot say at this stage what effect the reduction will have on the level

of remittances home. The plans for the reduction will be discussed with the Government of Nepal.

Review

Mr. Lane: asked the Secretary of State for Defence what representations he has received on the subject of the defence review since the Defence White Paper was published.

Mr. Mason: In addition to the 36 Parliamentary Questions put to me, I have received many representations from hon. Members of this House, both sides of industry, local political groups and the wider general public. The consultations with our NATO and other allies mentioned in the White Paper are, of course, continuing.

Mr. Lane: But is it not exceptionally irresponsible, even by the standards of the present Government, deliberately to reduce Britain's presence in the Mediterranean just at a time when the NATO position in that area is so insecure? Will the Government think again particularly about this part of their policy, in the consultations that the right hon. Gentleman mentioned, before they do lasting damage to NATO and Western security?

Mr. Mason: If the hon. Gentleman has read the Defence White Paper, he will know that NATO made representations about the southern flank, particularly about our naval presence, and that we have made some compensation. We have decided that occasionally the Fleet will go into the southern region, into the Mediterranean. We shall be available to the naval on-call forces, and the SAS Regiment will be standing by to assist on the southern flank.

Mr. Canavan: Will my right hon. Friend ignore any representations he may receive from SNP branches in the West of Scotland calling for nuclear bases to be kept open because of the possibility of loss of jobs and so on? Will he instead listen to representations from the STUC and the Scottish Labour Party, which are at least speaking with one voice in calling for the bases to be phased out?

Mr. Mason: My hon. Friend fought two General Elections last year on a policy regarding Polaris.

Mrs. Winifred Ewing: So did we.

Mr. Mason: Meanwhile we are pledged to maintain the effectiveness of the deterrent until the time is judged right to have multilateral negotiations on the phasing out of the Polaris deterrent force. But this depends entirely upon the progress made with the CSCE and MBFR negotiations.

Mr. Goodhart: As the Secretary of State acknowledged that the threat of violence to this country is increasing, why is he also increasing the number of senior NCOs who will be required to leave the Army?

Mr. Mason: The hon. Gentleman has obviously studied the White Paper with care. He will have realised that if we are to get down to the force levels demanded to save expenditure on defence we must restructure the Army, which means cutting out a brigade level of command. We decided that we could do it. We shall save 18,000 men in doing so. That, allied with the pooling of specialist functions, will enable us to make the savings in expenditure that we desire.

Mr. Alan Lee Williams: Does my right hon. Friend recall receiving a memorandum from the British Atlantic Committee, which made one or two very constructive suggestions to him and which noted that he still maintained the central thrust of our contribution to the central front of NATO?

Mr. Mason: I remember it very well, mainly thanks to my hon. Friend. The White Paper lays down clearly that our priorities are the central front—that is our front line as well—the East Atlantic and the Channel, and the security of the home base. The levels to which we are bent upon reducing, both in defence expenditure and in our Armed Forces, will give us security in those three areas.

Redundancies

Mr. Peter Morrison: asked the Secretary of State for Defence whether he is now able to estimate the total numbers of redundancies in the Armed Forces and related industries as a result of the defence cuts announced in the recent White Paper.

Mr. William Rodgers: The Defence White Paper gives full details of the expected redundancies amongst Service

personnel. Redundancies in the defence industries are primarily a matter for the firms concerned in the light of their workload, but the broad picture of a loss of 10,000 job opportunities by 1978–79 remains.

Mr. Morrison: Is the hon. Gentleman prepared to announce what the redundancy terms will be and what plans he has for rehousing those who lose their jobs? Does he intend to disband any units? If so, is he prepared to organise transfers to other units for Service men who lose their jobs?

Mr. Rodgers: I do not know whether the hon. Gentleman has in mind something more than the annexe to the White Paper, which set out the redundancy terms fairly fully. We have explained to all those who might be directly concerned that we shall do whatever we can to maintain the structure of units, consistent with what my right hon. Friend the Secretary of State has just said, and to soften the problem when Service personnel must become redundant. We have already made clear our view that special steps should be taken to avoid the difficult housing problems in which Service people often find themselves.

Mr. Watkinson: In the light of cuts in RAF personnel, does not my hon. Friend agree that the expenditure of over £50,000 on a house for the Director-General of Personnel Management at RAF Innsworth, and a further expenditure of more than £6,000 on improvements, is totally unwarranted? How can it be justified?

Mr. Rodgers: These are two unrelated questions. The principal Question was concerned with the need to look after those who become redundant. I do not underestimate my hon. Friend's concern. We will certainly look into it as a separate matter.

Mr. Winterton: What representations has the Minister had from trade unions and staff organisations at Hawker Siddeley about the effect of the defence cuts upon that company and possible redundancies? Is he aware of the importance of the export potential of the development of the maritime Harrier?

Mr. Rodgers: I am certainly aware of what the hon. Gentleman says in the


latter part of his question. The first part is covered by later questions on the Order Paper.

Mr. Cronin: Does not my hon. Friend agree that the redundancies in the defence industries would be greatly reduced if boards of directors turned their attention more to the export market?

Mr. Rodgers: It is the case that within well-known and proper restraints there are export opportunities.

Expenditure (Reductions)

Mr. Golding: asked the Secretary of State for Defence what representations he has received from trade unionists concerning the cuts in defence expenditure.

Mr. Mason: I have received representations from a variety of trade unions which are understandably worried about the effects of the defence cuts on future job prospects for their members. In addition, my hon. Friend the Minister of State for Defence has received delegations from trade unionists.

Mr. Golding: Is my right hon. Friend aware that the grave concern shown about the loss of jobs is shared by many on the Labour benches? Can he say whether any individual trade union has made representations to him in support of the cuts or in support of any intensification of them?

Mr. Mason: No trade union has come forward in support of the cuts. I can tell my hon. Friend that representations have been received from trade unions making the point that the cuts are excessive.

Mr. Younger: Will the right hon. Gentleman bear in mind that the thousands of redundancies which he is declaring in his Defence White Paper are being compounded by the shambles of the Government's policy on arms sales? Does he realise that this is immensely important for job opportunities throughout the country? Is he further aware that neither our customers know what they can buy from us nor our firms know to whom they can export? Will the right hon. Gentleman come to the debate on the Defence White Paper and give a full statement on what he proposes to do about this?

Mr. Mason: I must tell the hon. Gentleman that the Defence Sales Organisation and defence sales are not in a shambles. While he and some others may follow the glib, dramatic Press reports, the fact is that defence sales are doing extremely well. The organisation is this year selling abroad £560 million worth of equipment, equivalent to between 70,000 and 80,000 jobs. There are export orders well in excess of that figure in the pipeline.

Mr. Tim Renton: What about Libya and Iran?

Mr. Mason: The House might as well know about Libya and Iran. Colonel Dakhil, who is the official procurement officer of the Libyan Government, was informed at the end of February that we could not sell the Libyans submarines. The Minister from the Libyan Embassy was told at the Foreign Office on 3rd April that we could not allow that order. In the special circumstances of the time, the Libyan Government accepted it amicably and there are not strained relations between us. As for the stories about this, the House ought to be aware that a middleman, an entrepreneur, who has been frantically lobbying Members of the other place and Members of this House is not an official spokesman of the Libyan Government and has no right to speak on their behalf.

Mr. Wellbeloved: Is my right hon. Friend aware that successive defence reviews have had serious effects on the employment prospects of the people of South-East London? Is he further aware that the present defence review and the Government's dispersal policy cause great concern at Woolwich Arsenal and in Woolwich generally over the question of redundancies? Will he receive a deputation of Labour Members and trade unionists from the area to discuss the effect of the defence review on employment prospects?

Mr. Mason: I am always prepared to receive deputations from my hon. Friends. My hon. Friend knows that, apart from Service men and civilians employed by the Ministry of Defence, we estimated that 10,000 people in the defence industries would be affected, spread over a number of years. We thought that would be quite manageable and we gave the firms plenty of notice. Consequently


there is time for proper planning, the exchange of jobs and the provision of alternative work.

Mr. Warren: Will the right hon. Gentleman declare the loss of an order worth £500 million to the Indian Government because his party refused to endorse the export of Jaguar aircraft to that country? Further, will he say why the Defence Sales Organisation has told Hawker Siddeley to stay out of Persia? Is it not true that tens of thousands of people in the aircraft industry and associated industries will lose their jobs next year because the right hon. Gentleman's party will not hear its own supporters?

Mr. Mason: That supplementary question does not arise from the original Question. Since I am the head of the Ministry of Defence Sales Organisation, I do not mind the hon. Gentleman asking the question. In some countries we have to recognise that there is the question of ECGD creditworthiness, the possibility of purchasing—[Interruption.] The hon. Gentleman mentioned India. Dealing with Iran, we are proving to be one of its major suppliers. We have vast defence sales there and they are growing.

Mrs. Winifred Ewing: Does the right hon. Gentleman join with the Scottish National Party in congratulating the Scottish TUC on its persistent and continuous stand against nuclear weapons, similar to the stand of my party? If the Minister has received any representations about this question from the STUC, may we take it that they relate not to nuclear but to conventional weapons?

Mr. Mason: The answer to the latter point is "No, Sir" It is interesting that the Scottish TUC is dragging the Scottish National Party along by its coat tails.

Mrs. Ewing: Answer the question.

Mr. Speaker: Mr. Bennett, Question No. 9.

Mrs. Ewing: On a point of order, Mr. Speaker.

Mr. Speaker: May we take the point of order at the end of Questions and not now?

Later —

Mrs. Ewing: Can you, Mr. Speaker, give advice to back benchers seeking to

protect their right to hold Ministers accountable at Question Time? Earlier I asked a question which was relevant to Question No. 8. It related to representations which the Minister had received. I asked a simple, relevant and specific question: whether the STUC had made representations on a specific matter. I received no answer to that question. What protection can you offer me, Mr. Speaker?

Mr. Speaker: The position of the Chair is clear. I can comment neither on the hon. Lady's supplementary question nor on the Minister's reply. That is entirely a matter for the hon. Lady and the Minister, provided that they use parliamentary language.

Mr. Buchan: Arising out of that point of order, Mr. Speaker, what protection can you give to Members of Parliament if a question implies one point of view while the same party or person can say the opposite when they are north of the border?

Mr. Speaker: That was not a helpful intervention.

Hawker Siddeley, Manchester

Mr. Andrew F. Bennett: asked the Secretary of State for Defence how many aircraft, according to type, will be constructed or refitted at Hawker Siddeley, Manchester—Chadderton and Woodford— during 1975, 1976 and 1977 for use by the British forces; and how many orders by the British forces will be outstanding at Hawker Siddeley, Manchester— or the corresponding division of a nationalised aircraft industry—on 1st January 1977 according to present commitments.

Mr. William Rodgers: It is not the practice to give details of this kind, but it is expected that in each of the years in question the Manchester factories of HSA will have work on Victor K2 tanker conversions and on the manufacture of Nimrods. Refitting of the long-range maritime patrol force Nimrods with new avionics equipment is also planned to begin in the first half of 1977. There is also an ongoing programme of work in support of aircraft in service.

Mr. Bennett: Does my hon. Friend appreciate that the main concern of the


workers of Hawker Siddeley is over continuity of work? Is he aware that they are particularly concerned that there should be far more co-ordination between the Ministry of Defence, the Treasury and the Department of Industry to ensure that they get continuity of work, not necessarily on defence contracts?

Mr. Rodgers: My hon. Friend makes a fair point about continuity. This is a problem not only in this case but in other industries concerned with defence procurement. I am satisfied that there is appropriate co-ordination. If my hon. Friend has any particular problems in mind, perhaps he will be kind enough to let me know.

Mr. Wall: Is the hon. Gentleman aware that the Hawker Siddeley factory in Brough faces a serious future with respect to employment unless he orders the maritime Harrier and accepts orders for the Buccaneer from South Africa? Is he aware that the trade unions have gone to see the South African Ambassador to say that they would like to build the aircraft?

Mr. Rodgers: I should like to hear the latter sentiment from those concerned rather than from the hon. Gentleman. I fully understand the principal problem of employment. I have met representatives of Hawker-Siddeley, Brough, and we appreciate that there are difficulties.

Mr. James Johnson: Is my hon. Friend fully aware how deeply these defence cuts will bite into the work load of Hawker Siddeley which employs 4,000 or 5,000 Humberside workers? Other hon. Members and I have received deputations in Hull and Westminster which have expressed great anxiety. The Government turned down a request to make and export Buccanneers to South Africa. [HON. MEMBERS: "Why?"] We do not want to export them to South Africa because we object to the society and way of life of South Africa. That apart, will the Minister tell us what answer we can give to those men in their anxious state of mind?

Mr. Rodgers: I know of my hon. Friend's long and deep concern about Brough. He puts his finger, properly, on a genuine dilemma, which is the need to make substantial savings on defence

to contribute to the problems of the national economy and at the same time to avoid consequences for employment. It is a difficult problem, and we are trying to find a reasonable middle way.

Mr. Pattie: Is the Minister aware that research and development work is in progress at Woodford on the airborne early warning system? What will be the consequences for employment there if that British project is cancelled in favour of the American airborne and early warning control system?

Mr. Rodgers: That is a hypothetical question because for the moment research is continuing, and we are a long way off making the sort of decision which the hon. Gentleman has in mind.

Torture Training

Mr. Robin F. Cook: asked the Secretary of State for Defence how many selected Service personnel have undergone voluntary torture as part of their training at the latest convenient date for which figures are available.

Mr. William Rodgers: None, Sir.

Mr. Cook: I accept that answer, but does my hon. Friend accept that a number of Service men are being invited to undergo aids to interrogation which include the techniques of hooding, wall-standing, the use of a noise-making machine, restricted diets and deprivation of sleep? Does he accept that many hon. Members are gravely disturbed to discover that such techniques, which have been withdrawn from service in Northern Ireland, are still being used, albeit on volunteer Service men? What possible evaluation can he offer to suggest that experience of such exercises is likely to increase the resistance of Service men to these aids to interrogation by an enemy who is doing it for real?

Mr. Rodgers: I agree with my hon. Friend that these are difficult and sensitive questions which must be most carefully considered, particularly by Ministers. That is what is being done. As my hon. Friend fairly mentioned, all who are involved in training to resist these methods are volunteers. My own view is that in the last resort a man should have the freedom to choose how to resist those who might seek to take away his larger freedoms.

Sir David Renton: If the need for such training should arise, would it not be much simpler to ask volunteers to listen to the Budget Statement?

Employment (Hampshire, Wiltshire and Dorset)

Mr. Adley: asked the Secretary of State for Defence how many jobs will be jeopardised in total in Hampshire. Wiltshire and Dorset as a result of the defence review.

Mr. William Rodgers: Planning of reductions in Ministry of Defence civilian employees is continuing and it is not yet possible to give details. However, three of the stations which the RAF proposes to vacate are in these counties. So far as defence industries are concerned, we expect no significant effects in this area apart from those which might be produced at Westland's factory at Cowes in the Isle of Wight by reductions in our requirements for helicopters.

Mr. Adley: Is the Minister aware that Wessex is heavily dependent on jobs connected with the Forces of the Crown? Will he do his best to ensure that the attitude of his Government, and more particularly of his hon. Friends, is just as sympathetic towards people who are in and connected with the Services and who lose their jobs as it is to civilians who lose theirs?

Mr. Rodgers: The answer to both questions is "Yes".

Mr. Tomlinson: Does my hon. Friend agree that there is something nauseating about the Opposition, which later today will be going through the process of complaining about the public sector borrowing requirement yet on every conceivable opportunity urge upon him additional means of spending the public resources that apparently we do not have?

Mr. Rodgers: If my hon. Friend simply said that there was something nauseating about the Opposition, that would be sufficient.

Mr. Tebbit: May we make the hon. Gentleman aware that we welcome the new-found interest of Government supporters in jobs in the defence industries? We welcome their recognition that they all stood for election on a programme

of axing those jobs and putting those men out of work and that they have only just found out. If the hon. Gentleman wants to learn how to restore some of those jobs without increasing public expenditure. why does he not tell the Secretary of State for Industry to abandon his idiotic plan to spend £200 million on nationalising the aircraft industry and to spend that money instead on buying more weapons from the industry to protect the country from his hon. Friends who are sitting behind him?

Mr. Rodgers: The hon. Gentleman is being a little unfair, but then we are all a little unfair from time to time. The question of a balance to ensure an adequate defence—to use a phrase adopted originally by the Secretary of State for Defence in the previous Conservative Government—is difficult. There are bound to be discussions, arguments and some pain. By and large, we believe, in the light of all that, that, broadly speaking, we have the answer correct in the Defence White Paper.

Hawker Siddeley, Bitteswell

Mr. Lawson: asked the Secretary of State for Defence whether he can now state what redundancies are likely to occur at Hawker Siddeley, Bitteswell, as a result of the present Government's defence cuts.

Mr. William Rodgers: The number of redundancies at particular factories depends not only on our decisions on defence cuts but on decisions by management on such matters as the reallocation of work within the company and changes in the amount of work put out to sub-contract.

Mr. Lawson: Is the Minister aware that the uncertainty caused by the defence cuts, the fears of redundancy and the uncertainty that will be caused by his failure to answer my Question is very unsettling for the fine work force at Hawker Siddeley, Bitteswell, in my constituency? Will he allay that uncertainty by giving a more forthcoming answer to questions about the Government's curmudgeonly attitude to potential overseas customers, who are important for Hawker Siddeley in general and for Hawker Siddeley, Bitteswell?

Mr. Rodgers: I entirely agree with the hon. Gentleman about the very fine


work force of Bitteswell. I had the advantage of discussing some of these matters recently with their representatives. As I am sure the hon. Gentleman will agree, in the last resort it is for management to decide, after consultation, how best to use the work force in the light of the orders available. I am sure that management will do that and take account of all we have said here and enter into further discussions if it so wishes.

Mr. Leslie Huckfield: Will my hon. Friend accept that the men who work on the Argosy conversion project have a special case since four out of 14 of the aircraft conversions are already partially completed? Does he realise that it is probably cheaper to complete those conversions which have been started than to cancel them?

Mr. Rodgers: My hon. Friend has put down a later Question on this subject, but I am afraid that his assumption is incorrect.

North Sea Gas and Oil Installations

Mr. Townsend: asked the Secretary of State for Defence whether he is satisfied that the new proposals he announced in his statement on 11th February provide adequate protection against possible sabotage or hijacking of North Sea gas and oil installations by terrorist groups.

Mr. William Rodgers: Yes, Sir.

Mr. Townsend: Has the Minister taken note of the recent Soviet naval activity in the area, including a patrol by a Russian submarine? Does he not understand that it is essential to have naval helicopters in the area? Bearing in mind the wide criticisms that have come from independent defence experts, will the hon. Gentleman be sufficiently broad-minded to take a completely new look at his proposals. which are totally inadequate?

Mr. Rodgers: With respect, the hon. Gentleman is confusing two different problems. One problem is that to which he has referred this afternoon—namely, the visits to the area of Soviet ships. All I can say is that they have made no infringement of the safety zone, although we continue to pay careful attention to their movements in the light of inter-

national law. The announcement I made earlier this year was concerned with the problems of hijacking and sabotage. Of course we shall remain broad-minded, but for the moment we have no reason to change our mind on the fact that our original proposals are sound.

Rear-Admiral Morgan-Giles: When the Russians were snooping round the rigs, can the Minister tell us what was the position of HMS "Jura" and HMS "Reward"? How long would it have taken them to get to the area at full speed?

Mr. Rodgers: I can tell the hon. and gallant Gentleman that when, as he chooses to put it, the Russians were snooping round the rigs, they were under close surveillance from Nimrod aircraft. As he knows, the availability of aircraft is an important part of this package.

NATO

Mr. Trotter: asked the Secretary of State for Defence whether he will publish in the Official Report the NATO communiqué issued on 19th March on his planned defence cuts; and whether he will give details of the extent to which the United Kingdom's maritime capabilities in the Eastern Atlantic and Channel areas referred to in the communiqué, are to decline.

Mr. Mason: Yes, Sir. I will arrange for the text of the communiqué to be published in the Official Report. As regards our maritime capabilities in the Eastern Atlantic and Channel areas, with the exception of a reduction in the numbers of conventional submarines our planned contribution to these areas, which the Government regard as crucial to our national security, will be unaffected by the defence review.

Mr. Trotter: Will the right hon. Gentleman explain why the communiqué expressed special concern at the decline of our forces in these areas? Will he advise us whether he feels that a worthwhile addition to our strength has been made by committing a civilian-manned auxiliary with two helicopters—namely, RFA "Engadine"—and a small number of 20-year-old Canberra aircraft, which can only be described as clapped out?

Mr. Mason: It is a pity that the hon. Gentleman is so scathing and snide on defence matters when he supposedly has some knowledge of the subject. If he reads the communiqué and the White Paper he will know that we supply 70 per cent. of the maritime effort of all NATO in the Eastern Atlantic. Indeed, NATO is greatly dependent upon us. Secondly, although the hon. Gentleman mentioned RFA "Engadine" he also knows, because of representations made to us by NATO, that we are converting HMS "Hermes" to undertake an antisubmarine rô le. Thirdly, we are going ahead with modernising and re-equipping Nimrod aircraft for their maritime patrol ô ole in the Eastern Atlantic.

Mr. Younger: Will the right hon. Gentleman confirm that virtually all the comment upon his defence review from NATO has been deeply critical of the details contained in the review? Bearing in mind the extreme uncertainty that at present exists throughout the whole of the southern flank, and particularly in Portugal, Greece and Turkey, will he produce to the House a sensible strategic or military reason for reducing our contribution in this area at the present time?

Mr. Mason: The hon. Gentleman must take note of the original Question, which refers to the Atlantic. In that area we have been undertaking the major role, and we shall continue to do so. It is true that our NATO allies said they were seriously disquieted by our review, but they have affirmed that we have not gone so far as to start an unravelling within Western Europe.

Following is the communiqué issued on 19th March 1975:
In accordance with the usual NATO practice, the United Kingdom Government, having reached provisional conclusions on their Defence Review, initiated the process of consultation with their NATO allies in December 1974. The implications of the changes proposed have been assessed by the NATO military authorities and there have been several exchanges of views in the Defence Planning Committee of the Alliance. These took place against the background of a statement that the British Government regarded their plan to reduce defence expenditure to 4½ per cent. of GNP by the middle 1980s as a firm decision.
The Alliance welcomes the assurance that NATO commitments remain the first charge on British defence resources; that no reductions are envisaged in advance of an MBFR

agreement in the forces deployed in the Central Region; and that the United Kingdom will maintain the effectiveness of its present strategic and tactical nuclear contribution to NATO.
The Alliance has nevertheless expressed its disquiet at the scale of the reductions proposed and their effect on NATO's conventional defence vis-à -vis the increasing capability of the Warsaw Pact. The changes of special concern are: the reduction of reinforcement capability in the Northern and Southern Regions; the removal of naval and air forces from the Mediterranean area; and the decline in maritime capabilities in the Eastern Atlantic and Channel areas.
The Alliance is pleased to note, however, that in response to its representations, the British Government have announced in today's White Paper their willingness to introduce certain compensatory measures to alleviate the more damaging features of the proposals, although the total resources allocated to defence will not be increased. It attaches particular importance to the undertakings to continue to participate in NATO maritime exercises in the Mediterranean and to maintain certain reinforcement options for the Southern Region. It also accepts the British offer to continue Allied consultation about other measures aimed at mitigating the effects of the reductions.
The Alliance has urged the United Kingdom to keep its new programme under review, in consultation with its Allies and in the light of developments in the economic, political and security situation as they arise. It hopes that the British Government will continue to judge the scale and nature of their military contribution to NATO not in financial terms alone, but in terms of its total value to deterrence and defence throughout the Alliance

Expenditure

Mr. Cryer: asked the Secretary of State for Defence if the proportion of gross national product spent on defence will be reduced to the proportion of Great Britain's NATO allies if the GNP annual growth is less than 3 per cent.

Mr. Mason: Many factors could affect the position over the next 10 years, but we see no reason at this stage to change the long-term assumptions.

Mr. Cryer: Does not the present economic situation mean that further cuts in defence expenditure will have to be made if Labour Party policy is to be met? Will my right hon. Friend start by reviewing the contract to purchase Lance tactical nuclear weapons for £55 million? Does he not regard it as a disgrace that a Labour Government should be embarking on that sort of expenditure on these obscene weapons when money is urgently needed for schools and social services?

Mr. Mason: Whenever the question of public expenditure is discussed, it must be remembered that it is a matter of national concern. I suppose that defence will have to play its part as on previous occasions. I must inform my hon. Friend and the House that we are going ahead with the purchase of Lance tactical nuclear weapons in place of Honest John, and that we shall have tactical nuclear weapons in Western Europe so as not to escalate from conventional defence right through to the horror of using the strategic deterrent.

Mr. Onslow: Will the right hon. Gentleman reaffirm his assurance to the House that the cuts that he has introduced are, in my view, once-and-for-all cuts and not just precursors of further progressive cuts year by year? Will he take it from us that we are not interested in disarmament by inflation or by deflation and that we want to see this country possessing adequate defences against the enemies which we face, to which the hon. Member for Keighley (Mr. Cryer) seems to be either indifferent or blind?

Mr. Mason: Yes, I can tell the hon. Gentleman that the test of our defence spending is whether it guarantees our security. It is on that that we rest.

Mr. Wellbeloved: Does my right hon. Friend consider it appropriate to publish the gross national product spent on defence by non-aligned countries? Is he aware that non-aligned Sweden, which has not fought a war for over 100 years and which has had the benefit of a Socialist Government for nearly 50 years, finds it necessary for the maintenance of peace and the defence of freedom to spend more, expressed as a percentage of its GNP, than does the United Kingdom?

Mr. Mason: Yes. Of course, my hon. Friend has answered his own question. If he wishes to pursue the matter in detail, I shall be only too pleased to give him full replies.

Mr. Fairbairn: Will the Minister note—[Interruption.]

Mr. Speaker: Order. This is delaying the Prime Minister's Questions.

Mr. Fairbairn: Will the Minister note that the moment when the hon. Member for Keighley (Mr. Cryer) asks for the abolition of the obscene nuclear weapon

and the moment when the hon. Member for Moray and Nairn (Mrs. Ewing) says that there has been a marriage between the Scottish National Party and the STUC with a view to this country having no nuclear weapons is the very moment when nuclear submarines from the Soviet Government are circling the Scottish oil rigs?

Mr. Mason: No. On perusing the hon. and learned Gentleman's dress, whether it be Palmerstonian, Disraelian or Asquithian, the answer is that the Russians in perusing the rigs are either curious or jealous.

ECONOMIC POLICY (PRIME MINISTERS' SPEECH)

Mr. Lawson: asked the Prime Minister whether he will place in the Library a copy of his public speech at Cardiff on 15th March about economic policy.

Mr. Norman Lamont: asked the Prime Minister whether he will place in the Library a copy of his public speech on economic policy in Cardiff on 15th March.

The Prime Minister (Mr. Harold Wilson): I refer the hon. Members to the reply which I gave to the hon. Member for Mid-Sussex (Mr. Renton) on 8th April.

Mr. Lawson: In that speech the Prime Minister asked what number of unemployed would be tolerable to the Conservative Party. Does he believe that that form of economic illiteracy marks a serious contribution to the economic debate? If so, will he tell the House what number of unemployed is tolerable to the Labour Government?

The Prime Minister: The hon. Gentleman is quite right in that the whole of that speech was in the interests of democracy—namely, a polite suggestion to the Conservative Party that it should be thinking about having an economic policy. My reference to the number of unemployed is a reference to the article in the Sunday Express written by the right hon. Lady the Leader of the Opposition. In that article she covered up the problems by referring to the statistics of unemployment as meaningless. As regards the


second part of the hon. Gentleman's question, I think that these matters will be fully debated in the debate which will follow the statement of my right hon. Friend the Chancellor of the Exchequer.

Mr. Lamont: With regard to the Prime Minister's remarks about the Opposition's attitude to unemployment, may I ask whether he has read the latest report of the National Institute which mirrors the Treasury's thinking and which says that the Government should now deliberately use the threat and reality of unemployment as part of the anti-inflationary strategy? Therefore, is it not the height of hypocrisy for the Prime Minister to go on attacking others for what his Government are doing?

The Prime Minister: The hon. Gentleman is quite wrong. I read the report, which does not in any sense represent Treasury thinking. The fact that the director of the institute was a former pupil of mine at Oxford does not mean that it reflects my thinking either. On behalf of Her Majesty's Government, I emphatically repudiate that statement.

Mr. Horam: Does my right hon. Friend agree that, whatever happens today, what we need is a clear sector-by-sector strategy for industrial investment? Since Sir Ronald McIntosh of NEDO has re emphasised the need for such investment, and since there is experience of this policy in the little NEDCs, will be bring pressure to bear for the drawing up of a short-term plan to allocate the priorities for industrial investment?

The Prime Minister: My right hon. Friend is right to say that the NEDC has a mandate. The last time I chaired the NEDC we spent the whole day on the question of a sector-by-sector approach to investment. The whole House is coming to the view that the appalling lack of new investment over a whole generation under successive Governments has been responsible for our problems. This matter can be dealt with in part, but only as to a small part by macro-economic policies—financial policies and so on—and what we need is a direct approach to sector-by-sector investment. That is what the National Enterprise Board is all about.

Mr. Thorpe: Since in the Cardiff speech the Prime Minister said that the social

contract must be given a chance to succeed, will he confirm that the Civil Service pay is, so far as possible, based on comparability with the private sector and, therefore, is an important indicator? Will he say whether a rate of increase of 26 per cent. in the year, or 32 per cent. over 15 months, is within the TUC guidelines? If it is, are we not reaching the position that the norm is controlled by what happens to be the most recent and highest wage award?

The Prime Minister: No, Sir. The right hon. Gentleman has not quite fully understood the position of the Civil Service settlement. He will recall that since 1957 all parties in this House, including his own, have accepted the Priestley principle—namely, that in the fixing of wages for industrial civil servants in the dockyards, or wherever they may be, they should reflect pay outside for comparable work, in respect of carpenters, shipwrights or whoever it might be. The same is true of clerical and specialised grades. When we came to office last year I met administrators of the Civil Service and it became clear that in the previous three years the Priestley rules had been breached. I gave an assurance that as quickly as possible we would get back to the figures they should have had under what has been accepted by all parties. This settlement is a partial but not a complete acceptance or fulfilment of the pledge I then gave.

Mr. Ioan Evans: On the occasion of my right hon. Friend's visit to Cardiff—where he saw Wales win at rugby football and also saw the celebrations marking the granting of the freedom of the city to the Foreign Secretary and to Mr. Deputy Speaker—does he recall that he asked what alternative to the social contract was put forward by the Leader of the Opposition? Has he had any reply?

The Prime Minister: Well, no, actually, but we may get it this afternoon. Who knows? In fact the speech was not related to that matter. I asked in that speech whether, with the agreement of the Opposition, we could be informed about their policy on housing, public expenditure, wages and their whole approach to inflation. We have heard from them nothing at all. Personally I am an optimist and I expect that by


about the year 1979 they will get round to making some proposals in those areas.

Mr. Walters: As exports are vital to the British economy, since British influence is strengthened by the supply of our equipment, and as in the past we have supplied submarines to Israel, will the Prime Minister assure the House that he will not allow his own personal sympathies to interfere with the pursuit of British interests?

The Prime Minister: I think that my right hon. Friend the Foreign Secretary has already answered the question on that topic. The inspiration lying behind the hon. Gentleman's question is misconceived. I did not myself interfere in this matter because the decisions had been taken by the Department under the policy approved by the Government and announced in the House on 10th June last year. [Interruption.]
When I received a letter from a noble Lord in another place about a particular case, I said that I would look into the situation. When I did so, I found that a decision had already been taken. I understand from what has been published in the past year that the Libyans themselves had decided, several months before on commercial and price grounds, not to go ahead with the purchase of British submarines, even if Her Majesty's Government approved them. I applaud and agree with what has been done by the Secretary of State for Defence and the Foreign Office under the policy announced by the Government. I should be surprised if the hon. Member for Westbury (Mr. Walters) was pressing that we should send arms to Libya indiscriminately, not only because of our policy of maintaining a very strict control in relation to the Middle East generally but also because of Libyan sales of arms to the IRA.

EUROPEAN COMMUNITY (PRIME MINISTER'S SPEECH)

Mr. Mike Thomas: asked the Prime Minister if he will place in the Library a copy of his public speech of 22nd March on the EEC Referendum, given at the Scottish Labour Party Conference.

Mr. Tim Renton: asked the Prime Minister whether he will place in the Library a copy of his public speech on the EEC and related matters on 22nd March in Aberdeen.

Mr. Watkinson: asked the Prime Minister whether he will place in the Library a copy of his public speech at Aberdeen on the EEC and related matters on 22nd March.

Mr. Peter Morrison: asked the Prime Minister whether he will place in the Library a copy of his public speech in Aberdeen on the EEC and connected matters on Saturday 22nd March.

The Prime Minister: I did so, Sir, on 24th March.

Mr. Thomas: Is my right hon. Friend able to give any assurance to the House that he and my right hon. Friend the Leader of the House have been able to give further consideration to the question of voting in the referendum by those not resident at present in Britain? Does he not agree that it would be a grave injustice if those who have chosen to serve the country abroad in Community countries were unable to participate in the referendum on 5th June?

The Prime Minister: Yes, Sir, this is an extremely difficult problem. There are technical problems as well as other problems. I think that my hon. Friend is on a sound point when talking about people who have gone to work abroad on the instructions of their department or those who are working hard trying to get export orders for British products. I draw a distinction between those people and others who have permanently decided to seek tax havens abroad and who have severed their connections with Great Britain. We are looking urgently at this problem and no doubt this matter will be further debated in the Committee stage of the Referendum Bill.

Mr. Renton: Will the Prime Minister explain why, in his Aberdeen speech, he said that the Labour Party would come out of the referendum not weaker but stronger? Does that remark relate to the fact that having won the referendum vote he plans to sack the remaining anti-EEC Ministers, in which case the Labour Party will be stronger but smaller?

The Prime Minister: I regret to disappoint the hon. Gentleman but I must inform him that I have no such intentions. When I said that I believed the Labour Party would come out stronger, I meant that it would come out stronger because, despite the howls and wails of the Opposition about the referendum, there is a great deal of public support in the country for the idea of a referendum, for the recognition that political parties and other organisations are divided, and even stronger support for my decision that this should be a free vote in Parliament followed by a free vote of the British people.

Mr. Watkinson: Is my right hon. Friend aware of reports last weekend about criticisms emanating from Brussels concerning scrutiny procedures which exist in this House over EEC regulations? Will he convey to the Commission in Brussels the determination of those on all sides of the argument to maintain the limited opportunities we have to consider EEC regulations and the wish of this House to extend those opportunities?

The Prime Minister: I am not aware of any such criticism. I have seen some Press reports. These matters are well handled at regular meetings in the Council of Ministers and at summit conferences of Heads of Government. Should the Commission representatives who attend in an advisory capacity want to make these points, they will be robustly answered by myself and my right hon. Friends, who are all determined to preserve the rights of Parliament in this matter.

Mr. Morrison: In view of the Prime Minister's advice in his speech about a comradely debate on the EEC, will he say what is the difference between a junior Minister expressing his view in the House and getting sacked for doing so, and seven Cabinet Ministers doing the same thing in the same place by using their vote?

The Prime Minister: In January I made it clear to the House, and I have repeated many times since, that I thought it right that there should be freedom to campaign in the country on this unique matter. The guidelines to Ministers were approved by the Cabinet just before Easter. It was not even a piece of contumacy on my part since I was making an important visit to Belfast at the time. I agreed with the decision. [Interruption.] I hope hon. Members realise that Belfast is an important subject. On that occasion I fulfilled a long-standing engagement. The Opposition may laugh at the situation in Northern Ireland. After the murders of the past weekend, their conduct is excusable only because it is Budget Day and because of the state into which they get.
I agreed with the recommendation of the Cabinet. I hope it will be generally agreed that it would not have been helpful to what proved to be an excellent debate if a large number of Ministers had made their speeches from the back benches. That is the view of my colleagues and myself. I am sure that it is right.

WAYS AND MEANS

BUDGET STATEMENT

Mr. Speaker: Before I call the Chancellor of the Exchequer, I remind hon. Members that at the end of the Chancellor's speech, as in past years, copies of the Budget resolutions will not be handed around in the Chamber but will be available to hon. Members in the Vote Office.

INTRODUCTION

3.33 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey): When I presented my first Budget just over a year ago Britain was simultaneously emerging from two months of three-day working and entering a period in which her own and the world economy were bound to be dominated by the effects of an unprecedented increase in the price of oil. Both the three-day week and the oil crisis created uncertainties about the development of our economy which made prediction dangerous and policy precarious.
A year later many of these uncertainties have diminished. We recovered more quickly than many expected at the time from the consequences of the three-day week, and in the middle quarters of 1974 output was 1 or 2 per cent. above the level of a year earlier. But now that the consequences of the oil crisis can be seen more clearly they provide a formidable setting for British economic policy in the next few years.
In the first place, the increase in the price of oil combined with the increases in the price of food and raw materials which we must import have inflicted a heavy blow on our real income ase a nation. Although through the year as a whole, taking into account the fall in the first two months and the later recovery, our gross domestic product was little changed, the savage lurch in the terms of trade against us between 1973 and 1974 meant that the nation's real income actually fell by about 4 per cent. last year—in effect, it took away 4 pence from every pound we earn.
We entered 1974 with a balance of payments deficit already running at a rate

equivalent to 3 per cent. of GNP. But the cost of the oil we imported last year was about £2,900 million more than the year before, and this left us with a current deficit in 1974 of £3,800 million—equivalent to more than 5 per cent. of our GNP. In effect, we were spending 5 per cent. more as a nation than we were producing.
In 1974 we had little difficulty in borrowing sufficient money to cover this enormous deficit on commercial terms, from sources which imposed no policy conditions on their lending. But there is a danger in future that the supply of unconditional funds may prove inadequate to meet our needs. If we are to go on attracting such funds their owners must believe that the value of the money they have placed with us is not threatened by the consequences of our policy actions or inactions.
This brings me to the second consequence of the oil crisis—its impact on inflation in Britain. In February last the Retail Price Index had increased nearly 20 per cent. compared with February 1974. The major source of this inflation for most of last year was the increase in world prices to which oil made such a contribution. But for many months now the prices of most metals and nearly all other industrial materials have tended to fall. The price of most imported foodstuffs except sugar and beef has been fairly stable. The price of crude oil to the United Kingdom has been much the same since mid-1974. So for the last six months or so the main cause of rising prices in Britain has been the scale of wage and salary increases, which were far in excess of what could be justified by the increases in prices and could not possibly be offset by improvements in productivity. Also, whereas last year we were not alone among Western countries in having a very high rate of inflation, there is a risk that this year we shall be out on our own, far above the rest.

Mr. Peter Tapsell: rose—

Mr. Deputy Speaker (Mr. George Thomas): I hope that the Chancellor will be allowed to make his speech, because there are three full days for discussion.

Mr. Healey: I hope that I do not need to stress the domestic damage which


would be caused if inflation continued at this rate. Such inflation redistributes the nation's wealth and income in an arbitrary and anti-social way. It engenders a deep sense of insecurity in all sections of society. It distorts the allocation of resources and makes rational planning of expenditure extremely difficult at every level, for the housewife, for business and industry, and for the Government themselves. If we are almost alone among the industrialised countries with so high a rate of inflation it will have very serious consequences for our trade and payments. Our costs and prices will be tending all the time to rise relative to those of our trading partners. In other words, our international competitiveness will be tening to decline.
Unless we were willing to contemplate a continuing downward drift in our exchange rate which would increase our domestic costs and prices further still, we would find it impossible to prevent our balance of payments from actually deteriorating at a time when we clearly need to improve it substantially.
The third major impact of the oil crisis is one which affects the whole world but which I think we in Britain foresaw more clearly than many of our partners. The fact that the oil-producing countries would be unable at first to spend the enormous additional sums of money they earned meant that the rise in oil prices was bound to reduce world demand. We argued continuously last year that the consuming countries should recognise that the size of the resulting petrodollar surplus would threaten a world slump unless they were prepared to take compensating measures to increase demand. We ourselves did so in July and again in November to the extent which we felt we could afford, given the size of our external deficit and the rate of our domestic inflation. Others were much slower to react. The result is that the exceptional boom between 1972 and 1973 turned rapidly into a world economic recession which is already the most severe since the Thirties.
It is far too rarely recognised, even perhaps by Governments, how long a time lag there must be between fiscal action and its consequences for demand and employment. The main reason why our rate of unemployment in Britain has

risen so much less than that of nearly all our competitors is that we took action before the blow hit us. In fact, the effect of the July and November Budgets in stimulating employment in Britain is now being felt. It will add about £1,000 million to demand in the financial year which has just begun. By the same token the full effects of the recent measures of the German and American Governments will not be felt for some time. Nevertheless, they give us real grounds for confidence about the world outlook in 1976, although it is still difficult to be certain how soon world recovery will begin and how fast it will proceed thereafter.
In the early stages of the oil crisis there were also huge uncertainties about the size of the petrodollar surplus that was likely to emerge, and some exceptionally high figures were being quoted of the cumulative size which these surpluses would reach. Those who put about estimates of this size not only took a very pessimistic view of the future course of oil prices and the associated elasticity of demand but also appear to have underestimated the extent to which oil-producing countries would be able to spend their revenues, mainly on imports of goods and services, but also partly on very generous aid to certain countries of the Third World. There is a developing consensus that the cumulative petrodollar surplus will reach its peak a good deal earlier than expected and that the peak itself will be a good deal lower. Many people now believe that a cumulative surplus by 1980 of the order of $ 250 billion in 1974 prices is somewhere near the likely outcome. If this is indeed the case, then the strains on the international monetary system imposed by the petrodollar surplus will be easier to handle. Moreover, the new IMF recycling facility which is already operating, and the OECD Financial Support Fund which we signed last week, will help further to reduce those strains. But for the same reason the consuming countries will have to plan on transferring resources to the producers to pay for their oil faster and on a larger scale than seemed likely to be necessary a year ago.
I have started with this brief account of the impact of the oil crisis on Britain and the world because it establishes the setting within which we must seek to


solve our own national economic problems—problems which are at least a generation old, reflected in structural weaknesses which have so far defied the efforts of successive Governments. As I have said on more than one occasion, I do not believe that we are likely to find the solution to these basic structural problems solely through the instruments of fiscal policy. The whole of our post-war experience demonstrates that macroeconomic measures by themselves do not ensure that we have sufficient modern plant and equipment or sufficient workers with the skills needed to maintain our place in a highly competitive world market. They must be accompanied, therefore, by measures which directly affect the tempo and direction of our industrial development. I propose to include in my Budget provision for a number of such measures which at least start on the necessary changes, and will shortly be reinforced by the proposed new instruments of industrial policy.

ECONOMIC REVIEW

Mr. Healey: I now turn to review the economic background of my Budget in more detail. A year ago I inherited an economy still overheated by the excessive reflation and monetary expansion of 1973. In my measures in March last year I was concerned to ensure some easing in the pressure of demand without permitting the international factors to which I have referred to inflict on us the waste of human and material resources involved in mass unemployment. At the same time I sought to ensure a shift in the structure of demand towards investment and exports.
In fact, fixed investment in manufacturing last year was 10 per cent. higher than in 1973, holding up well right to December. Exports of goods increased 7 per cent. in volume last year, and the latest figures have been very encouraging. We seem for some time now pretty well to have maintained our share of world trade in manufactures, and we may even have increased our share lately, since the volume of our exports has held up while world trade has actually fallen.
At the same time, the volume of our imports increased very little last year and has fallen since. But, as I have said, this physical shift of resources in favour of

our balance of payments was not sufficient to offset the enormous shift in the terms of trade against us.
The volume of personal consumption fell a little at the beginning of last year but recovered during the latter part and seems to have held up so far this year.
Thanks to the increases in demand, our gross domestic product was maintained, and for most of last year the rise in unemployment was fairly moderate. Though it has risen substantially in the last four or five months, in mid-March the percentage rate of unemployment for the United Kingdom, seasonally adjusted, was 3·2 per cent., which in contrast to most other industrialised countries was no higher than the rate of unemployment at the beginning of 1973. But we have nearly a quarter of a million workers on short time.
In the period ahead, the growth of our exports will turn critically on the recovery in world trade. Given the scale of the reflationary measures now taken in the United States and Germany, I think it sensible to work on the assumption that the recovery will be under way by around the turn of the year. Completion of the downward adjustment of stocks in the United States and the expansionary measures taken recently in France and Japan, though fairly modest, should help too.
During the first three quarters of 1974 the volume of total world imports probably grew modestly—perhaps by some 2½ per cent. In the fourth quarter an absolute decline seems to have set in, which seems likely to have continued until the present quarter. We may, however, be close to the bottom of the trough. If so, trade will begin to recover in the second half of this year. After the turn of the year. there is reason to hope that growth will be fairly rapid. By the standards of previous trade cycles, there would be nothing exceptional either about the timing of this upturn or about a rate of growth of 10–15 per cent., or even more, once it gets under way. The fastest growing element in world trade over this period will probably continue to be the imports of the oil-producer countries.

Public Sector Finances

Mr. Healy: So far as public sector finances are concerned, the House will recall that in


November I put the public sector borrowing requirement for 1974–75 at £6,300 million. Since then there have been further changes which have increased this figure to £7,600 million. Current receipts in total have been much the same as expected, but there have been a large number of changes on the expenditure side. Nearly £300 million of the increase is accounted for by the measures already announced in respect of Burmah Oil, the Crown Agents and Channel Tunnel compensation. There has been an increase of about £1,000 million in current expenditure, the bulk of which is accounted for by higher wages and prices than had been expected in November, not least as a result of the Houghton award for teachers. Within this total, a further £100 million reflects additional expenditure on subsidies, principally in respect of agriculture and housing. The fact is that when inflation is running at the rates hitherto regarded as normal, it has little significant effect on the balance between public expenditure and receipts. But in the conditions of last year the inflation caused by excessively large wage and salary increases raised public expenditure in money terms much more than public sector receipts, and the public sector deficit rose sharply. This inevitably faces the Government with the unenviable choice between cuts in the expenditure programmes previously planned or massive increases in taxation. Indeed, it must cause one to reflect seriously on the wisdom of planning public expenditure solely on the basis of constant prices.

Monetary Developments

Mr. Healy: I have aimed to keep the rate of monetary expansion firmly under control and to avoid a repetition of the experience of 1972 and 1973 when excessive monetary growth contributed substantially to inflationary pressures, as I gather the new Conservative Front Bench would agree. In 1974, on the other hand, M3, the broader definition, rose by 12½ per cent. while M1 rose by 11 per cent.; both of these rates were very much lower than the underlying growth rate of gross domestic product in money terms and compare much more favourably still with the 28 per cent. growth in M3 in the previous year. That this modest rate of monetary expansion has been compatible with the larger public sector borrowing require-

ment reflects various factors £in particular, the large domestic sales of public sector debt outside the banking system, the way in which the external current balance of payments deficit has been financed, and the fairly modest level of demand for bank credit from the private sector. With money supply rising at this rate, the growth of banks' interest bearing eligible liabilities was, in late 1974 and early 1975, increasingly well within the guideline or "corset" set out under the supplementary deposits scheme. In fact, the "corset" was no longer necessary, at least for the time being, to keep the growth of money supply down to an acceptable rate. On 28th February, therefore, the Bank of England was able, with my approval, to suspend the operation of the scheme.
Interest rates have fallen substantially over the past year. This has been a welcome relief to industry and other borrowers.

Pay and Prices

Mr. Healy: As I said earlier, the rate of inflation for many months has been determined primarily by the increase in wages and salaries. We in the Government have honoured our side of the social contract by our programme of legislation on industrial relations, by fiscal legislation to secure a juster and more equitable distribution of wealth and incomes, by action on food subsidies and rents, and by generous provision for the pensioners and others among the under privileged in our society. Total Government expenditure on items which make up the social wage increased 34 per cent. last year—or about 12 per cent. in real terms. In fact the social wage now amounts to about £1,000 a year for every member of the working population.
The TUC honoured its side of the contract in its pay guidelines, the heart of which is that there is only a limited scope for real increases in consumption at present and that in general pay increases should, therefore, be confined to compensation for the rise in the cost of living since the last settlement.
Many in the trade union movement have worked hard to apply the guidelines. But the general rate of pay increases has been well above the increase in the cost of living and much further still above the


level in countries which compete with us. The threshold payments introduced by our predecessors played an exceptionally damaging role here. Some of the higher increases were awarded to low-paid workers or to groups, particularly in the public sector, who had been unfairly held back by the statutory policy. But rates of increase which ought to have been exceptional have been applied to others who have no such justification.
As a result, by February the retail price index stood 19·9 per cent. above a year earlier and the wage rate index was 28·9 per cent above. Analysis of settlements made since last July gives a rate not much less than this for the total pay increases on a year earlier for those concerned. These settlements were made in a period when the RPI increase was 17 per cent. to 20 per cent. So pay has been running about 8 per cent. or 9 per cent. ahead of prices. I do not believe that anyone would claim that the TUC guidelines were intended to permit this result.
As I have warned the House and the country on many occasions since last summer, settlements so far beyond the increase in the cost of living are bound severely to restrict my room for manoeuvre in this Budget and to limit the pace at which the Government can carry out their remaining commitments under the social contract.
The immediate effect of excessive wage settlements is to increase private consumption, with damaging effects on the balance of resources in the economy, which the Government must seek to remove by increasing taxation, as I warned the House I would last November. But within six months the wage increases will feed through into the prices of the goods and services produced by the workers concerned. The higher rate of inflation damages both our competitiveness and our credit as a nation. When it is as high as it has recently been in this country, it also destroys business confidence, disrupts the planning of industrial investment and leads to increased unemployment and short-time working. If the wage settlements in the public services are as large as they have been recently, they must add substantially to the public sector deficit, and so put pressure on the Government towards restrictive budgetary policy. The gains from such wage increases are limited

and transient, the losses enduring and widely spread.
Bitter experience under many post-war Governments has, I think, taught most of us on both sides of the House that a statutory policy for incomes is unlikely to produce better results. Unless, however, the voluntary policy achieves stricter adherence to guidelines laid down by the trade unions of their own free will, the consequence can only be rising unemployment, cuts in public expenditure, lower living standards for the country as a whole, and growing tension throughout society.

ANALYSIS AND STRATEGY

Mr. Healy: It has been traditional in Britain for many years to make the centre piece of the spring Budget the so-called Budget judgment. I did so myself last year. As I them explained, the Budget judgment is conventionally seen as an estimate of the amount of demand which the Government should put into the economy or take out of it in order to achieve the optimum use of resources in the short term. For many reasons I do not propose to adopt that approach today. Against the setting which I outlined at the beginning of my speech. I must seek to strike a new sort of balance between the tactical needs of the immediate future and a strategic attack on the long-term structural problems of our economy.
I fully understand why I have been urged by so many friends both inside and outside the House to treat unemployment as the central problem and to stimulate a further growth in home consumption, public or private, so as to start getting the rate of unemployment down as fast as possible. I do not believe it would be wise to follow this advice today. As I have said, I did last July and November adopt reflationary measures whose full effect would only be felt this year. I cannot afford to increase demand further today when 5p in every £we spend at home has been provided by our creditors abroad and inflation is running at its current rate. I do not believe anyone in Britain would thank me for producing an even larger deficit on our balance of payments and injecting a further massive dose of inflation through price and wage increases.
Moreover a Rake's Progress of this nature could not last for long. The patience of our creditors would soon be exhausted. We would then face the appalling prospect of going down in a matter of weeks to the levels of public services and personal living standards which we could finance entirely from what we earned. I do not believe that our political or social system could stand that strain.
Fortunately, the alternative to reflation now is not a continuing rise in unemployment over the indefinite future. The measures I took last year should ensure that our levels of unemployment in Britain this year will be less severe than those in other countries affected by the world recession. The main purpose of my Budget today will be to ensure that our economy can take full advantage of the strong recovery in world trade we can expect next year. I have emphasised many times to my Finance Minister colleagues at international meetings in public and in private that the countries with comparatively strong balance of payments positions must lead the way to world recovery for the benefit not only of themselves but of the international economy as a whole. For these countries to maintain deflationary policies is to damage the flow of world trade just as directly as by introducing physical controls on imports. Now that most of them are taking the necessary decisions, we in Britain must be able to take full advantage of the trading opportunities they will offer us. Of course, if those opportunities proved, after all, inadequate I should have to consider other measures for maintaining employment in Britain.
My intention in this Budget is to establish a strategy which will enable us to achieve a very substantial improvement in our current account deficit in the next two years and to eliminate the deficit entirely as rapidly as possible thereafter. We have to set more of our national resources aside for exports. This is not a question of choice or of political decision: it is a fact of the world we live in, a fact which I must budget for now. Our overseas deficit must be removed. and the world must know that it will be removed.
It is not a question of removing our deficit at a stroke or in a single year.

Indeed, as I think is now universally accepted, so long as the oil-exporting countries are unable to spend all their earnings on goods and services from the consumer countries, the consuming world must accept the corresponding deficit and finance it by borrowing from them. This can be done through the market, directly from the oil producers or indirectly through international institutions, using recycling mechanisms such as the oil facility I helped to set up in the IMF.
But several factors have emerged in recent months which make it necessary for us in Britain to reduce our balance of payments deficit more rapidly than would be possible under existing policies. One reason, as I have already explained, is our current rate of inflation. Another is the evidence that the oil-producing countries may be spending their wealth rather faster than envisaged and that we must therefore be ready to pay them by supplying the exports which we owe them rather faster. A minor, but not insignificant, factor is the delay in the expected flow of oil from the North Sea in the next year or two which was described in yesterday's Brown Book.
Our offshore oil remains an asset of unique value and we still expect to reach self-sufficiency by 1980, but the build-up of supplies will now follow a profile slightly less helpful for our short-term problems.
Behind all these particular reasons for closing our deficit more quickly lies one overriding and, to me, absolutely compelling argument. We in Britain must keep control of our own policy. We must keep ahead of events. It would be disastrous if we were forced. as sometimes in the past, into running desperately after events which we could not control. By relying unduly on borrowing we would run the risk of being forced to accept political and economic conditions imposed by the will of others. This would represent an absolute and unequivocal loss of sovereignty which I think neither side of the House would wish to invite.
One of the disadvantages—or perhaps advantages—of being a Finance Minister at the present time is the exceptionally wide diversity of views among professional economists. Apart from the general uncertainty of forecasting, to


which I referred last November, there are deep divisions among the experts about what makes the economy tick. However valuable their advice on specific issues, they find themselves divided on most of the major problems on which the politician most needs their help—like growth and inflation. Some of them even admit it. though humility has not always been a hallmark of their profession.
At present there are particularly fierce disputes about the causal relationships between the four components of a nation's economy which together—and a priori, as my tutors used to tell me years ago—must add up to zero: the external balance, the financial balance of the public sector, and the balances of the corporate and personal sectors.
But although there are different approaches to the analysis of this problem I think most commentators would agree that it is impossible to bring about a sustained and progressive improvement in the balance of payments over a period of years if at the same time the public sector financial deficit is increasing rapidly as a percentage of GNP. Yet, unless I take steps today to change the situation, this is the prospect which now faces us. So I must give the House some explanation of the state of our affairs seen from this particular angle of approach.
The pre-Budget estimate for the public sector financial deficit in 1975–76 points to a figure of nearly £9 billion. Though bitter experience compels me to emphasise the substantial margin of error in such estimates, I am convinced that a figure of this size is inconsistent with the strategy I have laid down. The public sector borrowing requirement, which is higher than the financial deficit, since it includes borrowing for on-lending to the private sector or overseas, was similarly going to rise to over £10 billion. Expressed as a percentage of GNP this represents an increase from just under 10 per cent. in 1974–75 to over 11 per cent. in 1975–76.
The main reason for this increase is that incomes financed by the public sector are rising faster than present rates of inflation, whereas on present policies the receipts of the public sector are doing no more than keep pace with the inflation. Pay in central and local govern-

ment is likely to cost upwards of £3 billion more in 1975–76 than in 1974–75. That forecast is based mainly on settlements or proposals already made. Retirement pensions, which are related to the increase in earnings, and other grants to persons are likely to cost between £2½ and £3 billion more. There will also be an increase of about £l billion in the servicing of the debt.
On the receipts side, the yield of personal taxes on income and of national insurance contributions is rising faster than the inflation, but this is more than offset by the slower growth of the yield of other taxes, including in present circumstances the corporation tax, which shows an actual decline, and the excise duties.
I have come to the conclusion that to budget on the basis of a public sector deficit of some £9,000 million and a borrowing requirement of over £10,000 million would involve unacceptable risks. In November I was prepared to tolerate a deficit of nearly £5,000 million and a borrowing requirement of over £6,000 million because I was satisfied that in the circumstances of the time this would not lead to unacceptable consequences for the pressure on resources, the balance of payments or money supply. Subsequent events have. I think, justified that judgment. But a deficit and borrowing requirement of the scale forecast for 1975–76 on the basis of unchanged tax rates would be too high by any standards. My intention is to reduce the borrowing requirement by well over £1 billion in 1975–76 and by about £3 billion in 1976–77.
This change can be brought about only by some reductions in both public and private spending. The reduction in spending would be necessary in any case if resources are to be made available to take advantage of the big improvement in world trade that I foresee for next year. There remains the problem of allocating the burden of readjustment between the public and private sectors and deciding what the timing should be.
The White Paper on Public Expenditure warned that the burden of taxation would have to rise. The situation, as I see it, makes a sizeable increase in taxation unavoidable. But to attempt to take the whole burden on taxation would make an impact on personal consumption


so large as to generate new inflationary pressures. Some cut in public expenditure, too, is therefore unavoidable.
But if we are to avoid the wasteful disruption and extra costs always involved by short-term cuts in expenditure programmes—we have all too much experience of that in Governments of both parties—we must plan the reductions well ahead so that they cause the least possible damage when they are carried out. They must also be chosen and distributed so as to preserve as far as possible the industrial and social priorities of the Government. I have therefore decided, as part of the forward strategy that I have explained, that in the current year I shall rely on higher taxation, which can take effect at short notice. and that the reduction in public expenditure should take place in 1976–77.
It is essential that these budgetary instruments should not be undermined by any relaxation of our stance on monetary policy. It is my intention that the growth of money supply should continue to be contained at a level which does not fuel inflation and that, consistently with this, the credit available should be concentrated on the essential needs of the economy I will not hesitate to reintroduce the supplementary deposits scheme should this prove necessary.

MEASURES AFFECTING INDUSTRIAL CAPACITY

Mr. Healy: In our present situation the most important single object of economic policy must be to improve the performance of our manufacturing industry. Generations of schoolboys have been taught that Britain is crucially dependent on the export of manufactured goods to pay for her indispensable imports of foodstuffs and basic materials. The slow rate at which our exports of manufactures has grown over the last century, and particularly in the last 50 years, has undoubtedly been a major constraint on the sustainable rate of our economic growth. In the last 20 years the situation has been made worse by the fact that our imports of finished manufactures increased so much faster than our exports of manufactures, making our net exports increasingly inadequate

to pay for our net imports of food and raw materials.
In the 10 years, 1964 to 1974, the volume of our imports of finished manufactures increased by 14 per cent. a year while our exports of finished manufactures rose by only 6 per cent. a year. In the three years up to the end of 1973 the situation became a great deal worse. The volume of imports grew at 23 per cent. a year while exports increased by just under 7 per cent. If these trends were allowed to continue, it would not take many years before we became net importers of manufactured goods as well as being net importers of food and raw materials. It would be impossible to balance our accounts without savage cuts in our standard of life. We would have to earn a living far below that of other countries by being a tourist attraction and a provider of banking and financial services.
It is imperative to reverse this trend. and it is not impossible to do so. In fact, last year was one of the rare years when our exports of finished manufactures increased by more than our imports—just over 7 per cent. in volume compared with less than 2 per cent. Of course, one cannot build much on the experience of a single year and it is possible that this was due to special factors.
But from now on we must do everything in our power to ensure that our exports of manufactures increase faster than our imports and not the other way round. We must preserve and improve our international competitiveness—a word that covers many things other than just relative wages and prices. It comprises the quality and availability of industrial capacity and of skilled manpower, and the efficiency, the originality and the vitality of our industrial management. It includes, above all, the ability to deliver on time. In all these respects there is a vast task of regeneration ahead of us. We must reverse the process of deindustrialisation—of a steady loss of jobs and factory capacity year after year—which my right hon. Friend the Secretary of State for Industry described so convincingly in a recent article. The Industry Bill now before Parliament will shortly provide two new and powerful instruments for this regeneration. In my Budget measures, to which I now turn.
I have attempted to complement my overall financial strategy and to foreshadow the operation of those new instruments with specific measures which, though modest, go to the heart of our industrial problems.
Whatever the short-term constraints, we must protect and improve the industrial capability which will be essential for our economic growth in the longer term. This applies both to manpower and to investment and is particularly necessary if we are to take full advantage of export opportunities next year without suffering from the supply constraints which limited our performance during the last boom in 1972–73. The measures I am about to describe will go some way to reduce the level of unemployment in the short run as well as improving our industrial capacity in the medium term.

Manpower and Training

Mr. Healy: One of our most persistent problems is the shortage of skilled manpower in key industries and key areas. In a recession one of the first cuts that firms make is in their training programmes; and, at the same time, potential trainees are less willing to undergo training when they see less immediate prospect of it leading to a definite and attractive job, especially if it means being away from home or moving permanently. So, when an economic upswing comes, bottlenecks emerge in the supply of skilled and trained manpower, particularly in the engineering industry. What is more, the problem seems to get worse and the shortage arrives earlier with each new business cycle. We must therefore use the recession to prepare for the upswing by improving the level of training, both by firms themselves and in the Government's skill centres and colleges of further education.
Accordingly, in consultation with my right hon. Friend, the Secretary of State for Employment, I propose to allocate an additional £20 million in 1975–76 and £30 million in 1976–77 to the Manpower Services Commission, for the purpose of strengthening and accelerating the growth of the training programmes of industry and of the Training Services Agency introducing special measures of training for the unemployed; improving the efficiency of the Employment Services Agency; and providing additional incen-

tives for job mobility. This will be on top of the substantial development already planned in the programmes for which the Commission is responsible. It will make available training for some 30,000 additional people in 1976. In addition to 20,000 places provided once-and-for-all short term, the total involved in Training Services Agency schemes in 1976 will then stand at 80,000 compared with 46,000 in 1974 and only 5,540 in 1964.
The problem is not, however, only a short-term one and it is not only a matter of providing more facilities for training but also of making better use of the skilled manpower we already posses and encouraging people to acquire skills. This calls for a substantial effort by both sides of industry at the level of the individual firm or factory as well as by the Government. The Manpower Services Commission includes representatives of industry, and in recent months the Secretary of State for Employment and I have had the benefit of much valuable advice from the commission, supported by its agencies. We intend to continue this, and our meetings will be underpinned by continuing consultation at official level.

Temporary Employment Subsidy

Mr. Healy: Another possibility which we have discussed with the Manpower Services Commission is that, in a period of high unemployment, special payments should be made to firms for a limited period if they were prepared to defer planned redundancies. There would be no question of using such a scheme to encourage overmanning or to prop up firms which would be incapable of standing on their own feet in normal times. The scheme would relate to large-scale redundancies in areas of high unemployment, and would be intended for situations where early recovery offered a sure prospect of economic employment in the firms concerned. Then it would make good sense from every point of view that the workers should be kept in productive employment rather than becoming unemployed. In some cases the extra time could be used to arrange for their redeployment into more valuable jobs.
The Government have decided that although this is not a measure called for by the present situation, we should put ourselves in a position to use it if the


circumstances required. My right hon. Friend the Secretary of State for Employment will, therefore, be putting down an amendment to the Employment Protection Bill to provide the necessary enabling powers.

Public Sector Investment

Mr. Healy: Following lengthy discussions in the National Economic Development Council on the long-standing problems of inadequate investment and industrial capacity, two studies on the investment programmes of the nationalised industries are being made. The first is designed to give them a reasonable degree of assurance about the stability of their long-term investment, so long as it satisfies a stringent economic and financial scrutiny in the course of the annual investment reviews. The second concerns the industries' relations with their suppliers in manufacturing industry.
The measures we are now taking to restore economic pricing policies are an essential feature in bringing commercial criteria to bear on the industries' investment programmes. And I believe that these policies and the return to financial viability will do much to improve morale throughout the whole field of public enterprise and to help ensure its efficient use of resources.

Government Support for the Private Sector

Mr. Healy: As regards the private sector, our general approach must be to establish an economic framework within which companies themselves have both the ability and the will to mobilise the resources available for investment. I hope this Budget will help in securing that framework. But in addition I believe that there is a need for the selective use of public funds to stimulate investment and growth in particular sectors of private industry. The National Enterprise Board and Planning Agreements will soon provide us with new instruments for helping to raise the level of industrial investment. In Scotland and Wales the new Development Agencies will have similar tasks as part of their functions.
Meanwhile, we intend to make full use of the powers of selective assistance under the Industry Act to prime the pump for

viable investment projects. We know that there are cases where major investment projects have been planned but shelved for the time being. I have decided that. to help in building up our productive capacity in ways that will assist the balance of payments, special assistance will be provided to encourage selected schemes of this kind to go ahead, provided that construction or installation work is begun before the end of March 1976. This will thus be a temporary measure. Priority will be given to projects which can be put into operation quickly.
In addition, we intend, in consultation with management and unions, to introduce further schemes like the one which is already in operation for wool textiles, designed to assist certain industries as a whole to modernise and rationalise. We intend to introduce such a scheme for the ferrous foundry industry on which preliminary discussions are being held with the Economic Development Committee. This is a good example of basic industry which it is essential to modernise.
I have decided that a sum of £100 million should provisionally be allocated for these two purposes. Assistance on this scale should generate additional investment by industry of £500 million to £600 million. That is investment which otherwise would not have taken place.
I have also decided to introduce a series of measures to encourage the shift of resources into the balance of payments. To facilitate the provision of working capital for exports, ECGD will provide facilities to guarantee loans for pre-shipment finance on large export projects. The details are to be announced in the next few days. This is in addition to the cost-escalation scheme announced by my right hon. Friend the Secretary of State for Trade last month.
My right hon. Friend the Secretary of State for Prices will also propose some further amendments to the Price Code to assist the liquidity of companies which are exporting, and to support investment. The scope of the investment relief in the Price Code will be extended to cover investment for exporting, and my right hon. Friend will take power to give some relief from the controls in certain specific circumstances where this would assist


the balance of payments. It is also proposed to increase the rate of the investment relief from 17½ per cent. to 20 per cent. and to extend it to cover commercial vehicles. My right hon. Friend will be issuing a consultative document about these changes tomorrow morning.
In addition to these measures, it is important that we should do all we can to economise on imports, and I hope that all those who are concerned with imports, including the providers of credit, will have our balance of payments position always in their minds.
We are just as concerned to get the best use of resources in agriculture as in industry. World prices of many of our food imports have risen steeply in the last two or three years, representing a heavy extra burden on our balance of payments. My right hon. Friend the Minister of Agriculture is about to publish a White Paper which considers future world price prospects and policies for food production from our own resources. This concludes, on the basis of the best judgement we can at present make about the likely future level of world prices, that they will call for a continuing increase in the output of our own agriculture over the next five years; and it will he our aim to achieve this.
This package of micro-economic measures will make a real contribution towards ensuring that industry does in fact take advantage of the opportunity presented to it by our macro-economic measures. The key to improvement in our economic performance lies in this area. Macro-economic strategy, as has been seen so many times in the past, can lead the horse to the water, but it cannot make him drink.
These measures will help exports, but it may be convenient if I mention here the steps I propose to take to end a particuar drain on our balance of payments. I refer to the cost in foreign exchange of gold coins coming in from abroad, the vast majority having no value other than their content of the metal. This particular operation developed rapidly in the middle of 1974 and appeared to he part of an international wave of renewed speculation in gold. I refrained from applying restrictions last autumn, when there seemed to be a real chance that the fashion would die down and, in particu-

lar, that the prospective relaxation in the United States on private gold holding would reverse the trend. This has not happened, however, and the time has come to stop this drain, which has amounted to on average £25 million a month in the first quarter of this year.
The problem must be tackled in two ways, aimed to prevent further speculation and hoarding. First, the exchange controls have been tightened under a statutory instrument being laid today. These provide that gold coins minted after 1837 can no longer be bought from non-residents except by authorised dealers, who can sell only to non-residents. Secondly, my right hon. Friend the Secretary of State for Trade has made the import of gold coins subject to individual licensing. The import restrictions will come into force from midnight tonight. The new exchange control rules are effective at once. Details are in a Treasury Press notice; and a revised Exchange Control notice will be available tomorrow.
We must include gold medallions and the like within the scope of the controls to prevent the obvious risk of speculators concentrating on these items, which have also been exempted since 1971. The new arrangements do not, however, impose any restriction on holding gold coins already here, so coin collectors need not register or obtain permits as they had to when gold coins were controlled before.

PUBLIC EXPENDITURE

I now turn to the cuts in public expenditure which have become inevitable. In addition to the regeneration of British industry we have always given priority to improvements in the social field. I plan to maintain this priority—not only in revising our public expenditure plans but also in making the necessary tax increases so as to maintain and extend the progressivity which was a feature of my earlier Budgets. In my Budget a year ago, I recognised that, in order to allow increases in social benefits, in housing and in subsidies on basic foods, savings would need to be made in other areas of public expenditure wherever possible. For example, we have done a great deal in recent months towards reducing the huge deficits in the nationalised industries, and there will be further substantial savings in 1975–76.

Our public spending plans were set out in the White Paper published in January. The White Paper described the implications of the expenditure programmes for the economy as a whole; and it warned that if the economic prospects deteriorated, the expenditure programmes would have to be reappraised.

The prospects unfortunately have deteriorated, and I have explained why public expenditure savings must make a substantial contribution in 1976–77 to the necessary reduction in domestic demand. The planned level of expenditure in that year, as set out in the White Paper, will be reduced by over £1,100 million at present prices or £900 million at 1974 survey prices. To permit comparison with the White Paper I will use 1974 survey prices in describing the distribution of these cuts.

The defence budget will be cut by £110 million, or about 3 per cent.

In the civil programmes, current expenditure on goods and services, including manpower, will generally be reduced by 1½ per cent., and capital expenditure by 10 per cent. But we have not thought it right to apply these reductions to certain services such as the general practitioner services or the provision of essential school places. These reductions will produce a saving of about £125 million on current expenditure on goods and services and about £280 million on capital expenditure.

No reduction is proposed in the building of new council houses, but a saving of £50 million will be found from other capital expenditure in the housing programme.

As regards subsidies, I announced last November the decision to phase out the deficits caused in the nationalised industries by price restraint, and we have also announced our intention to contain and eventually reduce the food subsidies. I now estimate that price restraint subsidies for the nationalised industries will come down from £550 million in 1974–75, at 1974 survey prices, to about £70 million this year and are likely to have been phased out completely by April 1976. The planned provision for food subsidies in 1976–77 will be reduced by £150 million and that for housing subsidies by £65 million.

Within the arrangements for the investment programme of the nationalised industries I have described, we plan to produce savings of about–100 million by securing a more stringent and realistic determination of their capital requirements. In addition, we have decided with reluctance that we cannot afford to increase our provision for overseas aid quite so much as we had hoped. A reduction of £20 million will be made, spread in this case over 1975–76 and 1976–77, in a programme still rising substantially in cash terms.

Finally, we have decided not to proceed with the mid-term census.

I am circulating a table in the Official Report setting out the incidence of these reductions in planned expenditure on the main programmes.

A sizeable proportion of these savings will fall on programmes administered by the local authorities, and I realise what this task means. I do not think that it would be right to leave them to face it without closer guidance and help from Ministers. I know that local authorities have complained that in the past Governments have urged them to spend on particular services and to save on the total.

This Government, however, have been working towards closer liaison between Ministers and local authorities on financial issues. My right hon. Friend will now put to the chairmen of the representative associations proposals to set up a consultative council on all matters of policy affecting local authorities which have major financial implications.

The council would be chaired by my right hon. Friend and would include senior Ministers and the leaders of the local authority associations, with senior officials from both sides meeting in support.

My right hon. Friend the Secretary of State for Scotland will be in touch with the new convention of Scottish local authorities about broadly similar consultative arrangements in Scotland. Related arrangements will be made for Wales.

Through this new machinery, central and local government should establish a closer mutual understanding of the constraints under which they each have to operate. Each will be able to contribute, more directly and effectively than before,


to the difficult but urgent policy decisions which will be necessary; and together they will be able to do the necessary monitoring. The new council will be faced in its first year with preparing for the unavoidably stringent rate support grant settlement for 1976–77.

As soon as discussions on the form of the new council have been completed, my right hon. Friend will be making a full statement to the House.

Looking beyond 1976–77, there will at best only be very restricted room for overall growth in public expenditure. Nevertheless, we shall aim to ensure, by a careful reassessment of needs and priorities in the 1975 public expenditure review, which will take account of the latest assessment of the economic prospects, that the most essential needs are met as far as possible.

In this context I want to emphasise that the Government are fully conscious of the special needs of families with children. That is why, as I announced in my Budget Statement last November, we have made the increase in family allowances to £1·50 a week which has just come into effect, the increase being subject to normal taxation only. This is the first increase in family allowances since 1968.

I also said last November that the Government would carry out their commitment to introduce a new scheme of child cash allowances or child benefits, payable for all children including the first, as soon as resources and the practicalities of administration allowed. We have now decided that, subject to parliamentary approval of the necessary legislation, the scheme will be introduced in April 1977. This is in fact the earliest date by which it is administratively practicable to extend family benefits to all of the 7 million families which will be eligible—over 3 million more than those now receiving family allowances. Such a scheme is, of course, potentially expensive; and against the background of the economic prospects and the resulting need to hold back planned expenditure, which I have already described, we shall need to accommodate its cost within the total which, in the light of future reviews, we conclude that we can devote to public expenditure at large in the years beyond 1976–77.

Although we cannot introduce the full scheme before 1977, we can take earlier action to help one group of families—namely one-parent families—who we think it will be generally accepted have a claim. to this additional support in advance of others. We therefore propose, subject again to parliamentary approval, to introduce an interim benefit which will in effect extend family allowances at the new rate of £1·50 a week to the first children of one-parent families who do not already receive an equivalent benefit—for example, in the widowed mother's allowance. The benefit will be treated for tax just like family allowance. This interim benefit will begin in April 1976 and will be replaced one year later by child benefits under the new scheme. One-parent families will thus be the first to benefit from our commitment to extend family support to the first child in each family. The public expenditure cost in 1976–77 will be about £23 million.

The necessary legislation to enable both these benefits to be brought into effect will be introduced by my right hon. Friend in due course.

COMPANY FINANCE

I now turn to the tax changes which. must accompany these cuts in public expenditure if we are to strengthen our economy and maintain our political and social priorities. First the company sector, and in particular the position of industrial and commercial companies. The past year has been a difficult one. I recognised this in my November Budget Statement. In particular I noted the problems caused by inflation, and I proposed two measures designed to relieve companies of some of these pressures.

In this coming year there is general agreement that the financial position of the company sector will improve compared with the past year, though inevitably there is doubt and uncertainty about the extent of this improvement. There are signs that this improvement has begun. It is encouraging that although demand for bank credit generally has been slack in recent months, bank lending to manufacturing industry has been holding up relatively well. There has also been a good response to the arrangements announced in November for making additional funds available through Finance


for Industry. Applications for loans totalling £600 million have already been made and some £100 million already granted. FFI is evidently well placed to make a significant contribution to industry's needs for medium-term finance.

In addition, there has, of course, been the very welcome revival in the stock market since the turn of the year, and the prospects for raising new equity capital are now considerably brighter than they were in November. The CBI agrees that prospects look somewhat better, but it sees rather less improvement than I would myself expect. I recognise that the company sector, taken as a whole, has faced a period of financial deficits, which it financed largely through borrowing from the banks. In recent weeks the opportunity has been taken to fund some of this borrowing through new issues. Even so, companies' net short-term liabilities for some time yet are likely to continue to represent an abnormally large proportion of total turnover.

The company sector is the major source of employment in Britain and of goods and services for domestic consumption and investment as well as exports. In the long run our growth prospects, and prosperity, depend on the company sector being able and willing to invest in new plant and machinery and equipped, therefore, to meet overseas competition on an equal footing. The Government have committed themselves in their White Paper on the Regeneration of British Industry to the creation during the next decade of a vigorous, alert, responsible and profitable private sector within our mixed economy. I emphatically endorse this commitment.

At the same time, companies must be expected to make an adequate contribution to the finance of the public sector. Companies do not operate in a vacuum but in an environment in which facilities are provided by central and local government; the nationalised industries provide them with more of the goods and services they need, just as the education system and the social services benefit their work force.

The stock relief measures and the Price Code relaxations which I introduced last November will greatly improve the financial position of the corporate sector this

year. A number of further proposals for relief have been put to me. I have examined them very carefully but I have felt bound to weigh them against the need to improve the financial balance of the public sector and to ensure that the burden of adjustment is spread as equitably as possible. Moreover, too many of the proposed changes—particularly suggestions that corporation tax should be reduced—lack selectivity. I favour a selective approach, covering measures of the kind I propose in this Budget. In the long run the strategy which underlines this Budget will redound to the benefit of the company sector, since it will contribute towards an economic environment in which industry can invest with confidence.

For these reasons I have concluded that no new general reliefs should be introduced this year. I have indeed considered whether, on the contrary, there is a case for seeking an increase in the tax contribution of the corporate sector. But, although the financial outlook is beginning to improve, companies are still feeling the effects of a period of financial deficits and I do not want to do anything which might prejudice the prospects of industrial investment this year. I propose, therefore, to leave the rate of corporation tax unchanged at the 52 per cent. which I introduced in March last year. The rates for small companies, co-operatives and building societies will also remain the same.

I do not propose, however, to repeat the advance corporation tax supplement this year. This will avoid adding to the liquidity problems of those companies that pay dividends and, therefore, ACT in the current financial year. Moreover, as I reminded the House several times last year, the surcharge introduced in my 1974 Budget will reduce the tax bill of companies this year, when the reduction in business activity makes this particularly welcome.

There is one way in which I propose to help company finance, though this will not come as a surprise. The House will remember that when I introduced a measure of relief from corporation tax in the autumn which was related to increases in stock valuations I promised similar action again this spring. The financing problems of traders who replace their trading stock in times of inflation are very serious. They would be


aggravated if tax had to be paid on profits calculated in terms of the traditional methods of stock valuation. My autumn proposals therefore gave relief for the abnormal inflationary element in the stock valuation, a relief which added some £800 million to company resources, and I then gave a pledge that similar relief would be given again this year.

In order to obtain the maximum immediate impact from the autumn stock relief, it was made retrospective in the sense that it related to accounting periods ending in the year 1973–74—that is, to the period on which the tax bills becoming payable this last winter were generally based. For practical reasons I could not make it available to all businesses but had to limit it to companies which carried considerable amounts of stock. I promised that this year I would include all traders in my proposals and would take account of the fact that those who had not benefited in the autumn had had to wait for their relief.

The relief given in the autumn was deliberately simple in design, for it was intended as a temporary measure until we can examine the recommendations of the Sandilands Committe on accounting for inflation. It will be looking at many other things besides stock valuation, but this must he an important element in its studies. The committee has not yet reported, and I think the best course this year is to continue relief on very much the same lines as before.

I propose, therefore, that this year's relief should be given on the lines of my autumn formula, measuring the stock increase over two years, however, instead of one only, but altering the scope of the relief in certain respects; for example, excluding land held as an investment and including professional work in progress.

For unincorporated businesses and those companies which did not qualify for relief in the autumn, relief will thus be available for the increase in stock valuations over the two years as a whole, less 10 per cent. of the aggregate trading profits of the two years. The relief will be given in the assessment for the second year; that is to say, for an unincorporated business in the assessment for 1975–76 and for companies in the assessments on

accounting periods ending in the financial year 1974.

To implement my promise that I would give some compensation to those traders who have had to wait a year for relief, I propose that for them there should be a separate and further deduction from taxable profits equivalent to 5 per cent. of the amount of the stock relief itself. For those companies which have already had relief under the autumn proposals the relief due this year will be measured by the company's history over the two years on the same basis as for unincorporated businesses. The relief it has received this year will be taken into account in the assessment for the second year.

The measures I have announced will mean a continuing improvement in the financial position of companies. This is both necessary and desirable. We need a strong and financially healthy industrial sector able and willing to invest funds in new plant and machinery to provide new jobs and in working capital and stocks to support existing operations. This is particularly important in the period before the expected upturn in world trade next year.

There is one other matter that I should refer to—affecting oil companies. In the White Paper on United Kingdom Offshore Oil and Gas Policy, published on 11th July 1974, it was announced that it was intended that the losses that had accrued to oil companies from transactions at artificial prices in overseas oil should cease to be allowable against profits arising after that date. The Finance Bill will contain the provisions to implement that intention.

INDIRECT TAXATION

I turn now to indirect taxation. At a time when some sacrifices are required of all of us, the consumer has to play his part, particularly where less essential expenditure is concerned.

Value Added Tax

I start with VAT. As I explained in my Budget Statement in March last year, the structure of VAT which we inherited from the previous administration suffered from the major inadequacy of its dependence on a single positive rate. I recognised that adequate preparation was


essential if a change in this structure was not to cause excessive difficulties to traders, and accordingly I authorised Customs and Excise to consult representative trade bodies. In preparing my proposals this year, I have taken careful account of all the views which have been expressed, particularly those relating to difficulties for retailers.

The House will recall that in November last year I introduced a special rate of 25 per cent. VAT on petrol, and I have now decided to make this 25 per cent. rate a more general feature of the VAT system, by taxing a wider range of goods at this higher rate.

I recognise that very few classes of goods are now generally accepted to be luxuries. Their sales are limited and, because of this, a higher rate of tax restricted to such goods would produce relatively little additional revenue. It is therefore inevitable that the higher rate has also to cover some goods which are used in most homes. However, I have concentrated on the less essential items, so that the better-off, who buy more of these goods—particularly of the expensive kinds—will bear a larger share of the tax burden. I have also concentrated, as far as possible, on items which represent large or fairly large purchases and are usually purchased separately, rather than on small items that are commonly sold across the counter in "corner shops" and other small, mixed businesses. This, I hope, will minimise the impact of my proposals upon small retailers, such as newsagents and chemists, whose difficulties I fully understand and whose hard work in adapting themselves to the new responsibilities of VAT I very gratefully acknowledge.

Accordingly I propose that from 1st May the 25 per cent. rate of VAT should apply not only to petrol but also to most domestic electrical appliances, other than cookers, space heaters and fitted water heaters—to radios, television sets, hi-fi and similar equipment; to boats, aircraft and caravans, other than those which are at present zero-rated; to cameras and binoculars; and to furs and jewellery. Full details of my proposals are set out in the Budget Resolutions.

The 25 per cent. rate is not out of line with other countries' VAT structures. Belgium also has a top rate of

25 per cent.; Italy has 30 per cent.; France 33⅓ per cent. and the Irish Republic 36¾ per cent.

The right hon. and learned Member for Surrey, East (Sir G. Howe) suggested the other day that 500,000 small shopkeepers might be driven out of business by a multi-rate VAT system and that thousands of extra civil servants would be needed to administer it. He allowed his imagination too free a rein, though perhaps this is easier to understand and even to forgive since it was under a Government of his party that the purchase tax reached its maximum complication of seven different rates. No doubt he was envisaging something comparable in VAT terms.

Nothing like 500,000 shopkeepers will be affected by my proposals. It is difficult to make a precise estimate of the numbers who will be affected, since, of course, one has to take account of secondary lines of business as well as of the main trade classifications. I would expect that the total number of retail businesses affected might be 50,000 at the very most.

As regards numbers of civil servants, last spring I approved an increase of 2,250 staff for the Customs and Excise for work on the control and administration of VAT, making a total of nearly 11,000 to be employed on this tax. This figure included an allowance of 1,000 for the contingency of a multi-rate VAT. At present there are still some 500 posts to be filled, but when this is complete I do not expect more staff to be required because the 25 per cent. rate is now to be extended beyond petrol.

I do not propose any change in the standard rate of VAT, which will thus remain at 8 per cent.

However, I should mention a small change I am proposing to make in the VAT regulator. At present this provides for variations by order within overall limits set 20 per cent. either side of the rate in force at the time. This means that, with the standard rate at 8 per cent., full use of the regulator up or down would produce the inconvenient rates of 9·6 per cent. or 6·4 per cent. Accordingly I shall be moving a resolution to increase the limit for variation by order to 25 per cent. on either side of the going rates. This will mean that the use of the regulator would result in


a standard rate between 6 per cent. and 10 per cent.

I estimate that my proposals for extending the 25 per cent. rate will bring in an additional £325 million of revenue from VAT in a full year.

In the last 12 months I have relieved from VAT aids for the disabled, protective hoots and helmets, and charitable donations of medical and scientific equipment. I realise that many hon. Members are hoping that I shall be able this afternoon to announce more reliefs from VAT for articles or activities to which they attach particular importance. I have considered most carefully and with much sympathy the many cogent arguments which have been put forward on their behalf. It is with the greatest reluctance that I have been forced to conclude that I cannot propose any further reliefs from VAT at a time when I am looking for such sacrifices in other fields.

Revenue Duties

I reminded the House a year ago that the Customs and Excise revenue duties on alcoholic drinks and tobacco are levied not as a percentage of price, like VAT. but as specific sums on given quantities of the goods concerned. I said then that I was tempted to restore the real value of these duties to what they had been five years earlier, but because of the substantial net rise in the retail price index that would result, and because of the increased pressure this would have meant on the threshold provisions introduced by the previous Government, I resigned myself to a more modest objective.

The effective burden of these duties, including the increases I introduced then, has been further eroded by inflation over the past year. In addition, the period has seen a reduction in the overall weight of tax on these goods. They benefited, along with other goods and services, when I felt able, last July, to reduce the standard rate of VAT from 10 per cent. to 8 per cent.

Now, however, when I am forced to call for general sacrifices, when rich and Poor alike face increases in essentials like rent and rates and fuel prices, it would clearly be wrong to leave untouched such forms of consumption as smoking and drinking, when the effective tax burden on them would otherwise

continue to fall. Instead of changing the rate of VAT on these goods, I have decided that the duties should be increased to give precise effects on the bar or retail prices of all these goods across the board. I hope it will be appreciated that the size of these increases reflects the fact that in the circumstances of this Budget the alternative to them would have been either a higher target for the revenue from direct taxation or an increase in the standard 8 per cent. rate of VAT.

I am as reluctant now as I was a year ago to increase the duty on beer, but the level of increase that I feel must be made in the burden borne by other forms of drink and the relatively low incidence of tax on beer persuade me that the beer drinker cannot reasonably expect to remain unaffected on this occasion. I propose that the total burden—including 8 per cent. VAT—should be increased by the equivalent of 2p a pint on average.

As for spirits, I recommend that the duty should be raised by an amount which, taking the consequential VAT effect into account, will produce a 64p increase in the price of a standard bottle of whisky or gin.

My proposal for all wines, including British wines, is for an increased tax burden, including VAT, equivalent to 24p on a standard bottle.

From what I have already said it will be clear that I consider some increase must also be made in the tobacco duty. Some, I know, will welcome this. Indeed, I believe it will be welcomed with enthusiasm and relief by anyone who watched the recent television programmes en the relationship between smoking and cancer. When VAT is taken into account, the total tax burden on most packets of 20 cigarettes will be increased by between 5½p and 10p depending on size and type—the average increase will be 7p.

These increases in the excise duties are large by any standards, but I believe them to be necessary if there is to be some equity in the burdens that each consumer must bear. Indeed, I know many people were surprised when my November measures did not affect these goods. The changes in the revenue duties which I have outlined so far, and which will affect the rates of duty payable on goods cleared from midnight tonight, will yield in a full


year an additional £185 million from beer, £60 million from spirits, £80 million from wine and British wine, and £275 million from tobacco duty, together with a consequential increase of £25 million from the 8 per cent. VAT on these goods.

Before I leave the revenue duties, I should tell the House that I think it opportune to propose a change in the structure of certain of these duties. Traditionally we have charged revenue duties on imported goods as customs duties. These duties are essentially fiscal in character, but they include a small protective element which it would be more in accord with our general commercial policy to charge under tariff legislation.

If we are still in the EEC at the beginning of next year we shall not be able to treat revenue duties on imported goods as customs duties. But we shall be able to continue to raise whatever revenue we need by charging excise duties on imports. In fact this is a change of practice well worth making whether or not we remain in the EEC, and the Finance Bill will contain proposals to this end. There are five Budget Resolutions which provide the necessary foundation for this legislation. Though it may appear rather complex, it is essentially a legal restructuring; but it will involve some recasting of the duties on wine of fresh grapes and other wines. The revenue and price effects will be negligible, and there will be a valuable gain in flexibility in international negotiations for the future.

I have no changes to propose in the levels of betting and pool betting duties, which were increased last year. But I do consider that changes are now needed in other areas. The rate of bingo duty has remained unchanged since its introduction more than five years ago, and I propose that the basic rate should be increased to 5 per cent. with effect from 29th September 1975. Changes in the structure of gaming licence duty have been urged on me, and I am proposing here to restructure the duty so that it depends upon the current rateable values of gaming premises, and so as to provide for a smoother gradation in the various rate bands. But I take this opportunity to increase the level of the duty from 1st October next when existing licences will have expired.

I also recommend changes in the tax burden on gaming machines. I propose that the net "take" on these should be liable to the standard rate of VAT from 1st November, but that this should be partly offset in respect of licences issued after the end of September by some abatement of the present duty rates on second and subsequent machines installed on individual premises and on holiday season licences. The overall effect of my proposals in the gaming and bingo fields is estimated to increase the yield by £12 million in a full year.

The total effect of all changes in Customs and Excise duties and taxes is estimated at £965 million in a full year.

It will be apparent that I have so far made no mention of the hydrocarbon oil duty. Hon. Members will know that a variety of suggestions have been put to me for altering the structure of taxation on road fuel, and indeed on road use in general. At the same time I have had regard to the fact that the tax burden borne by the private motorist has been increased twice in the last year, firstly by bringing petrol within the coverage of the VAT standard rate, and then by subjecting it to a VAT rate of 25 per cent. These changes, together with the recent increases in the pre-tax price of petrol, will have been particularly severe on those who need to make full use of their cars—those in rural areas or on shift work, for example. I have also taken account of the present depressed state of the motor industry, which is suffering both from the general recession in world trade and from the direct effects of the worldwide increase in petrol prices.

It is against this background that I have considered suggestions for increases in road fuel duty, or for the introduction of a two-tier petrol pricing system, as possible ways of achieving energy savings, or increasing Government revenue, or both. I have, however, come to the conclusion that further tax-induced price increases for petrol, with the same sort of distributional impact on people as the price increases over the last 18 months, should be avoided at this time. This includes two-tier petrol pricing which, if it were to have any appreciable impact on consumption, would require a large tax-induced increase in the price of all but a modest basic allocation for each motorist.

Accordingly there will be no increase in road fuel duties, and two-tier petrol pricing will not be introduced. Petrol consumption has reacted appreciably to recent price increases and seems now to be running some 10 per cent. below what would have been expected on the basis of pre-1973 trends. Obviously future tax increases on road fuel cannot be ruled out, should the economic situation, or the energy supply position, require this.

Vehicle Excise Duty

Nevertheless, I have concluded that I cannot, in our present difficult circumstances, avoid asking for some further contribution from road users.

I have chosen the duties on road vehicles. The vehicle excise duties have remained at their present rates since April 1968, since which time the general price level has increased by about 80 per cent. Thus, even if I were to double the duties, would be doing little more than restoring the relative burden of them to the level set in the spring of 1968.

In practice, however, I doubted whether would be justified in going so far. Accordingly, I am proposing an increase in the rate of duty on private cars from £25 a year to £40 a year. The same 60 per cent. increase will apply to the short-period licences, and to motor cycles, three-wheelers and pedestrian-controlled vehicles. These increases will bring in a further £209 million in a full year.

Somewhat different considerations apply to commercial vehicles. The bulk of the burden of the duty on private cars falls directly on private consumers and does not lead directly to any increases in prices of other goods and services bought by people who do not run cars. The duties on commercial vehicles, like other business costs, are likely to have some impact on prices in general. including export prices.

I therefore propose that the increase in duty rates for commercial vehicles should be restricted to such amounts as are necessary to keep a reasonable balance in the schedule of duty rates as a whole, including those for private cars. This points to a minimum rate for commercial vehicles of £40 a year, which would cover all vehicles with an unladen weight of less than 16 cwt. The lowest rate of duty, now charged on vehicles under 12

cwt., will be amalgamated with that for vehicles in the 12-to-16 cwt. category. All other commercial vehicles, including farmers' goods vehicles and showmen's vehicles, will be subject to duty increases of one-third in present rates. The duty on hackney carriages will be increased from £12 to £20 a year, but in order to avoid any substantial increases in the costs of public transport, the additional charge for every seat above 20 in a passenger-carrying vehicle will remain at 50p a year. These increases in commercial vehicle duties will yield £61 million a year, making total increases in the full year yield of the Vehicle Excise Duties of £270 million.

Together with the increases in Customs and Excise duties and the extension of the 25 per cent. rate of VAT, these increases in vehicle excise duties will bring the total increase in the RPI generated by the Budget to about 2¾ per cent. in the next three months or so. I greatly regret the need to raise the level of the price index in this way when inflation is already high. But the House must understand that in nearly all cases these increases in indirect taxation are in practice the effect rather than the cause of inflation. If taxes fixed years ago in money terms are not regularly raised to take account of the rate of inflation, the only alternative is a further increase either in the level of direct taxation—which in the present situation means personal income tax—or in forms of indirect taxation levied as a percentage of price, like VAT, which are already rising automatically as inflation takes its course.

Since increases in the income tax and in the standard rate of VAT would affect rich and poor alike, I thought it better to concentrate the tax increases in those areas of indirect taxation which affect less necessary expenditure or which have fallen heavily in real terms because of inflation in recent years. None of these increases touches essential goods, but they are all necessary because as a nation we are at present living beyond our means. For this reason attempts to offset them, or any other tax measures, through pay increases would be wrong, damaging, and in the end self-defeating.

I am arranging for the effect of the duty increases on the index to be monitored specially in the coming months. The results will be published monthly.

DIRECT TAXATION—MISCELLANEOUS

I now turn to personal taxation. The House has tackled a very heavy programme of financial legislation over the past twelve months. In order to lighten the load on this year's Finance Bill, I have thought it right to impose a strict order of priorities and accordingly to postpone some measures which in another year I would have regarded as highly desirable. Our programme, set out in the manifesto, is of course the programme for a Parliament. The measures which I announce today will represent a further instalment of that programme—and a further positive contribution to our ambition, on this side of the House, of creating a more just society.

Capital Gains Tax

On capital gains tax, I propose to end the so-called "bed and breakfast" arrangements whereby companies have sought to get relief for losses on shares with which they had no real intention of parting. This will require new rules for matching shares bought and sold by companies. The Finance Bill will also put a stop to a device which goes under the name of "double banking" whereby wealthy taxpayers obtain relief for a capital loss on gilts held for more than 12 months. The new rules for both shares and gilts will apply as from today.

I know that some people take the view that with present rates of inflation the time has come to introduce indexation for capital gains tax. I am not yet persuaded that this would be right. There is, however, evidence that this tax is bearing unduly heavily on those who hold assets for long periods and is too lenient on those who hold for very short periods, and over the coming year I propose to review the incidence of capital gains tax. In this Budget I propose to give reliefs to working farmers, small business men and the owners of historic houses on broadly the same lines as the corresponding special concessions given for capital transfer tax.

Taxes on Income

I now turn to the direct taxes on income. It is my responsibility, as

Chancellor, to ensure that the burden of taxation which I regard as necessary at the present time is shared fairly between those best able to bear it. This is not just a matter of fixing the rates of tax and of personal allowances. It has been my consistent aim to make the tax system fairer than it was when we assumed office, and this theme of fairness runs through all my proposals in the personal tax field.

First, I propose to introduce legislation in the Finance Bill to require that the Pay As You Earn system should apply to the pay of office workers and other staff engaged through agencies. This is an area where there has been some loss of tax because of the opportunity for claiming self-employed status, and the changes I shall propose will follow broadly what has already been done in the national insurance field. I will also bring forward provisions to make taxable at all income levels the benefit enjoyed by an employee where his employer operates a medical insurance scheme. I think it is particularly necessary for social reasons to ensure that this type of benefit does not escape taxation.

There will also be legislation to prevent avoidance of tax by the issue of vouchers to employees instead of normal pay—though I should make it clear that it is not the Government's intention to make any change in the existing luncheon voucher concession.

Much preparatory work is required to give effect to all these changes and they will therefore take effect from the next tax year starting in April 1976. So, too, will another measure making a procedural change in the basis under which holiday pay under certain stamp schemes is taxed.

The Lump

The evasion of tax and national insurance by many members of the so-called "lump" in the construction industry has for a long time caused widespread resentment. A scheme introduced in 1971 to deal with the problem set a pattern for a remedy, but experience has shown that it was not tightly enough drawn. It has been abused by those who sought to be self-employed but were unwilling to meet their consequential statutory obligations.

The Government gave a pledge in their election manifesto, and in the Queen's Speech, that they would deal with the problem. It is costing the Exchequer large amounts of revenue and bedevilling industrial relations in the construction industry.

For my part, I propose to implement this pledge by introducing fundamental measures to overhaul the 1971 scheme. First, all existing certificates, which excuse certain sub-contractors from deduction of tax at source, will be withdrawn. Secondly, holders of certificates will have to reapply and will have to satisfy much stricter conditions. Thirdly, a new type of certificate will be issued which it will be very difficult to forge, steal or otherwise misuse without detection. Fourthly, companies will be brought within the scheme, and it will no longer be possible to use them as a means of avoiding the tax deduction. And, fifthly, the Revenue is making major changes in its policing arrangements so that it will have a firmer control of the new scheme.

My aim is to ensure that only subcontractors who can satisfy the Revenue that they have genuine businesses and will meet their future tax liabilities in full will be entitled to be paid gross. Those who have abused the system will have to become employees if they wish to avoid the automatic deduction of tax. These new tax measures will, of course, complement the measures put forward by the Department of the Environment.

I propose also to deal with a form of avoidance that has been increasing during the last year or so. I refer to the number of companies offering so-called scrip options and similar schemes under which shareholders have been able to take dividends in the form of stock instead of cash and so escape liability to the higher rate income tax and investment income surcharge. These arrangements amount to an option not to pay tax and must, I believe, be brought to an end in the interest of fiscal equity. As already announced, I propose to charge such issues of stock dividends to tax with effect from 6th April last.

Next, I gave notice last year that I shared the view, which has been gathering force in recent years, that a taxpayer is entitled to some compensation by way of interest when repayments of income

tax owing to him are unduly delayed. Accordingly—and despite the very real administrative difficulties—the Finance Bill will include provision for a necessarily simplified scheme of compensation when tax repayments to individuals are delayed beyond 5th April in the year following the year of assessment. The Bill will also include provision giving, so far as possible, comparable compensation when late repayments of tax are made to companies and other bodies within the charge to corporation tax. The "repayment supplement", as it will be called, will be calculated using the same rate of interest as that attaching to underpayments of tax—currently 9 per cent—and will not be taxable. It will apply to repayments made after the Bill becomes law.

I also said last year that I intended to introduce new measures to encourage the more prompt payment of tax. The Inland Revenue has had consultations with the main representative bodies concerned about proposals in this area. I believe it is generally agreed that the present rules work very unsatisfactorily in a large number of cases. At the extreme they permit a minority of people virtually to opt out of the tax system for months or even years at a stretch. The new rules will apply to assessments made after Royal Assent. They will, in particular, include more effective rules for securing a reasonable payment on account and for charging interest when tax is not paid pending the result of an appeal; and also for charging interest both where large amounts of tax are delayed for a relatively short period and where smaller amounts of tax are delayed for a longer period. In framing these proposals I have borne in mind the representations that have been made to me about the pressures under which many businesses and accountants are working at the present time and the problems that would arise if the necessary changes attempted too much too quickly.

PERSONAL TAXATION—ALLOWANCES AND RATES

Personal Allowances

Before I come to the major issues of personal tax rates and allowances, there is a further point, relating to national insurance contributions with which I must deal.

When the House voted last year, against the Governments recommendation, to relax substantially the earnings rule for pensioners, I made it clear that we would have to find ways of financing this addition to our spending plans and this addition to the public sector borrowing requirement. and that we should not want this burden to fall on those with low incomes. The cost is considerable. We estimated that the extra cost to the National Insurance Fund—at the enhanced rates of benefit introduced earlier this month—will be £60 million in 1975–76, £110 million in 1976–77 and £145 million in 1977–78.

In the coming months my right hon. Friend the Secretary of State for Social Services will be reviewing the finances of the national insurance scheme with a view to settling the rates of contribution from April 1976 and the earnings limit up to which these contributions are paid. In this review, she will need to take into account the extra cost imposed on the National Insurance Fund by the relaxation of the earnings rule. The earnings ceiling for contributions will in any case need to be substantially increased in 1976 because of the increase in average earnings. In order to recoup the extra cost of relaxing the earnings rule in 1975–76 and 1976–77, the earnings ceiling will need to be increased by up to £8 a week more than it would otherwise have been. In this way the cost will be met without imposing extra burdens on the less-welloff contributors.

A major concern of any Chancellor in the personal taxation field must be the level of tax thresholds. Inflation reduces the real level of these thresholds just as it does the real level of cash payments, so that the employee or the pensioner, if nothing is done, can find that he has begun to pay tax even though in real terms, as distinct from money terms, his income has not increased. In my Budget speech in November I made provision for the elderly by my proposal for a new age allowance, and I proposed an increase, from £130 to £180, in the blind allowance. But I then deferred my decision about the other allowances, which I undertook to review in this Budget.

I now propose to increase the single allowance, with the associated wife's earn-

ings allowance, by £50, from £625 to £675 and the married allowance by £90, from £865 to £955. I recognise that these changes from last year, though substantial, fall some way short of full compensation for inflation, and I would have liked to be able to make larger increases. But in the present situation these increases, which will cost the Revenue £437 million in the first year and £546 million in a full year, are as far as I can go. By taking 400,000 people out of tax altogether they will at least ensure that some of the least-well-off members of our society do not have their small incomes yet further reduced by tax deductions.

I have also decided, after careful consideration, that it would be right to accept the proposal of the Finer Committee that the additional personal allowance—which can be claimed by a single parent who is also entitled to child allowance for a child living with him—should be increased, so as to make the aggregate of the single parent's tax allowances equal to those of a married man. I recognise that the two cases are not entirely similar, as the married allowance is an allowance for two people. Nevertheless, I think—and I am sure the House will agree—that one-parent families are a group which must command special consideration. The additional personal allowance will therefore be increased by £100, from £180 to £280, at a cost of £7 million in the first year and £8 million in a full year.

Apart from these changes, I propose to leave unaltered for the coming year personal tax allowances and the points at which the higher rates of tax take effect, and also the levels and rates of the investment income surcharge. I recognise that the result for most people will be, in spite of the increases in allowances. I have just proposed, that the burden of income tax in the coming year will be significantly increased, because I am not adjusting the various tax levels in step with money values. But I am afraid that my need for revenue is paramount, and I cannot offer any general relief beyond the increase in allowances proposed. The level of the main personal allowances will, of course, need to be looked at again in next year's Budget, as has been done this year.

For the rest, I would remind the House of the undertaking the Government have already given to review the levels of the


high rates of tax on earned income once the additional taxable capacity represented by ownership of wealth has been brought into charge by the wealth tax—proposals for which I shall be bringing forward, in the light of the report of the Select Committee at present sitting under the chairmanship of my right hon. Friend the Member for Battersea, North (Mr. Jay). I think the House will agree that when I review the higher tax rates on earned income I should also take action to deal with fringe benefits and with tax evasion.

Income Tax Rates

I come lastly to the rates of income tax for the coming year. I made it clear in my Budget speech last November that if wages rose above the level laid down in the guidelines of the TUC I would find it necessary to raise taxation in order to remove the excess demand involved. The House knows that wages and salaries have risen overall substantially above what was envisaged by the guidelines. I therefore have no alternative but to raise the income tax, as I warned five months ago. The increase I am about to announce can be regarded as an anti-inflation surcharge. I must warn the House that similar measures may be necessary in future unless the increase in wages and salaries is kept under better control.

My proposal is to raise the basic and higher rates of income tax by 2 percentage points—with the exception of the highest rate of all, where the increase of eight points made last year means that the level, in cases where the 15 per cent. investment income surcharge also applies, is already 98 per cent. The new basic rate of income tax will therefore be 35 per cent., and there will be a corresponding adjustment in the rate of advance corporation tax. The rate of deduction from payments to uncertificated sub-contractors will also go up to 35 per cent. in September.

The additional revenue from this increase in the rate will be £662 million in the first year and £771 million in a full year. The higher tax deductions will take effect for PAYE taxpayers in the week beginning 25th May. Because of the cumulative nature of the PAYE system, the initial effect of these changes will, I recognise, be significant, since the extra

tax due as a result of the rate increase on pay received since the start of the tax year will be taken from the first pay packet after the change. At the lowest income levels, however, the effect of the higher tax rate will be more than offset by the higher personal allowances, and the increases in the single and married allowances will take effect at the same time as the new tax rates. The increase in the additional personal allowances will take a little longer, as tax offices will need to recode the people affected, and the new allowances will take effect on the first pay day after 14th June. The elderly and the blind have, of course, benefited, from the start of the tax year, from the allowance increases I announced last November.

The combination of the measures I have announced today will reduce the public sector borrowing requirement by about £1,200 million in the current year.

CONCLUSION

These then are my proposals. The House will want to know how, as they are implemented, I expect to see the economy develop.

Firstly, I look forward to 1975 being a very much better year than 1974 for the balance of payments. We have made a good start in the first quarter, though the figures for March were favourably distorted by the London dock strike. For 1975 as a whole, despite the fall in world trade, there are good prospects that our deficit will be at least a billion pounds lower than in 1974. In other words, the non-oil deficit on the current account will have turned into a substantial surplus.

Secondly, the outlook for prices. The adjustment for the cost inflation already in the pipeline still has some way to run. Rent and rate increases are already under way. Nationalised industry prices are now reflecting increases in wage and other costs more fully. Mainly by adjusting the excise duties to reflect past inflation, my Budget measures themselves will put up the RPI by about 2¾ per cent. This means that for some months yet we must expect high figures for the RPI compared with twelve months previously.

However, the year-on-year figures published every month are slow to reflect a change of trend and may sometimes mask it completely. By the middle of the year,


once the increases I have mentioned have been digested, and the effects of lower food and commodity prices are feeding through, I would expect the rate of increase in the month-on-month index to begin to fall. In fact there are good prospects that between about June and December the cost of living will rise on average by not much more than 1 per cent. a month, implying an annual rate of the order of 12 to 16 per cent. But, as the House will realise, these figures will not be achieved if there is any acceleration in wage and salary increases.

Thirdly, for the public finances I expect the borrowing requirement in 1975–76 to be about £9 billion. Though higher in money terms than last year, as a proportion of GDP it should be about the same—about 10 per cent. Though this figure is large, my concern at its size is mitigated by two considerations. In the first place, the tax measures I have announced today will even at constant prices yield more revenue in a full year than in 1975–76. The public expenditure reductions, which will not affect the borrowing requirement to any significant extent this year, will have their impact in 1976–77. For that year I see good prospects that the borrowing requirement will be significantly lower as a proportion of GDP, since my measures will then reduce the PSBR by approximately £3 billion compared with £1 billion in 1975, while our GDP is then expected to be much higher.

Second, it is important to recognise that, at current rates of taxation and public expenditure, the borrowing requirement would be very much lower still if exports increased to the extent that output and employment at home could return to full employment conditions. Higher exports would mean higher incomes and higher tax receipts out of those incomes, to the benefit of the economy as a whole and the public finances in particular. Under conditions of full employment brought about in this way, the borrowing requirement would be some billions of pounds less than my present forecast.

These two considerations, therefore, both lead me to view my forecast public sector borrowing requirement without alarm, but they do, of course, make it more necessary than ever for us to follow

the strategy I have laid down today over the next two or three years.

The income tax changes will be at particular benefit to lower income taxpayers, especially, of course, one-parent families. Altogether 9 million taxpayers or 35 per cent. of the total will pay less income tax as a result of the Budget. This figure includes families with two children up to around average earnings. The increases in indirect taxation on inessentials will raise prices, but the impact will vary depending on how much individuals choose to spend on such goods. Allowing for the fall in income tax paid by lower income families, and bearing in mind the earlier decisions to increase family allowance and to introduce fully graduated insurance contributions, poor families will be affected least of all by my strategy of moving resources away from private consumption. Taking the measures as a whole, I am confident that their impact will be fair and progressive.

The effect of the Budget measures on employment has given me great concern, since I absolutely reject the use of mass unemployment as an instrument of policy, and this year employment will be seriously affected in any case by the world recession springing from the oil crisis. I think that hon. Members know that it is particularly difficult to forecast the unemployment figures, though so far the record of my Treasury advisers has been a good deal better than that of most outsiders. With all the necessary caution, I predict that, given a continuing low level of trade in 1975, the pressure of demand in the United Kingdom will continue easing and unemployment will continue to rise for the remainder of the year. I must warn the House that it could be touching a million, or 4 per cent. by the end of the year.

The Budget measures will reduce demand in 1975 by about £330 million and may be responsible for about 20.000 out of the total unemployed—about a fiftieth of the million. But this is part of the price we have to pay for inflation at current levels. On the other hand, in 1976, as world trade begins to grow vigorously again, I would expect to see a reversal of this trend set in and a continuing fall in the number of unemployed. I repeat, however, what I said


earlier, namely, that if the stronger countries fail to expand their economies sufficiently, I shall have to consider very carefully what measures I should take to maintain employment in Britain. I pledge myself in any case to take steps to increase employment once our inflation rate has settled down to the international average.

The Budget I have presented today is a hard one for all of us in Britain. It is dictated by the harsh reality of the world we live in. A severe Budget is a necessary element in any strategy for improving the overall performance of our economy, which has been lagging increasingly behind most industrial economies for more than a single generation. Added to the need for measures to produce the essential structural changes in the balance of our economy are the burdens we carry with other countries because the explosion of world prices has cut our real income by 4 per cent. But in this situation the key to our immediate success is the rate of inflation inside Britain, and it is our failure here which is responsible for the special severity of this Budget.

So long as pay and prices increase at their present rates, no Chancellor of the Exchequer who puts his country first would act otherwise than I have done this afternoon. The situation would be very different if through improvements in productivity and moderation in pay negotiations we could substantially reduce our inflation rate. With higher productivity, lower wage settlements and the consequential improvement in the balance of payments we could have the same standard of living with lower prices, lower taxes and, most important of all, more jobs. At the same time we should have a sounder currency, a better assurance of international credit and a greater degree of that business confidence which is a precondition of the investment we need most of all.

There is a better alternative to the stony road we have to follow at present. It requires only a sustained act of will to take it—an act of will from which no section of the community, on the shop floor, in the board room or in the home, can stand aside. If this Budget helps to convince the British people of this fact, it will have performed a long-term service to our nation even more important than

the solution of the problems which are its immediate aim.

Mr. Deputy Speaker (Mr. George Thomas): Under our Standing Orders, the first motion, entitled "Provisional Collection of Taxes", must be decided without debate. When that matter has been disposed of, I shall call the Chancellor to move the motion entitled "Amendment of the Law". It is on that motion that the Budget debate will take place today and on the succeeding days. The remaining motions will not be put until the end of the debate on Monday.

PROVISIONAL COLLECTION OF TAXES

Motion made, and Question,
That pursuant to section 5 of the Provisional Collection of Taxes Act 1968 provisional statutory effect shall be given to the following Motions:

(a) Spirits (customs and excise) (motion No. 3).
(b) Beer (customs and excise) (motion No. 4).
(c) Wine (customs) (motion No. 5).
(d) British wine (excise) (motion No. 6).
(e) Tobacco (customs and excise) (motion No. 7).
(f) Vehicles excise duty (motion No. 22).—[Mr. Healey.]

put forthwith, pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

AMENDMENT OF THE LAW

Motion made, and Question proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance: but:

(a) this Resolution does not extend to the making of amendments with respect to capital transfer tax or estate duty; and
(b) without prejudice to any authorisation by virtue of any Resolution relating to value added tax, this Resolution does not extend to the making of amendments with respect to that tax so as to provide—


(i) for zero-rating or exempting any supply;
(ii) for refunding any amount of tax;
(iii) for varying any rate of tax otherwise than by varying the standard rate in relation to all supplies and importations


on which tax is for the time being chargeable at that rate: or
(iv) for any relief other than relief applicable to goods of whatever description or services of whatever description.—[Mr. Healey.]

5.48 p.m.

Mrs. Margaret Thatcher: It is the privilege of the Leader of the Opposition to congratulate the Chancellor of the day on the manner and conduct of his delivery. It is a great strain for anyone to speak for two and a quarter hours. That is the time during which the Chancellor has been at us on his Budget. I note that while the Chancellor has been doing that, he has contributed to the revenue of the country. Indeed it is the strongest brew which I have seen a Chancellor take, and in view of the contents of the Budget, perhaps that is not surprising. He must be the last person to have taken a last sip at the old price.
I have read the speeches of some of those who have held this position. I noticed that the earliest time at which a previous Leader of the Opposition rose after a Budget speech was at four minutes past five o'clock. But those were in the good old Tory days when we actually reduced taxation in Budgets. In all my experience, I have never listened to a Budget which put so much additional tax on the British people at one go. It is a typical Socialist Budget: equal shares of misery for all.
We are in some difficulty knowing how to adjudge what the Chancellor of the Exchequer says. In his speech last year he made a very vigorous comment about the borrowing requirement. He said that he intended to be really tough and that he would reduce it to some £2,700 million. In fact, he intended just about to halve it. However, when he says that he intends to halve it, in practice he just about doubles it. After all the steps that he has taken this year, we now have a public sector borrowing requirement of some £9 billion. In other words, if we adjudge him by doubling everything that he says he will halve, it becomes extremely difficult to know what effect he will have. He seems to talk tough, but he delays some of his tough measures until next year, although he has put a fair share of tough measures on to this year.
It is clear to us all that the right hon. Gentleman has three main problems: public expenditure, inflation and borrowing. But the key to them is the first two. I take public expenditure first.
The right hon. Gentleman inherited from us some public expenditure reductions. He frittered those away deliberately by putting up public expenditure by 10 per cent. in real terms over this last year. That is the reason why he is in such difficulty now. His problems lie not in his predecessor's action but in his own. If he had not put up public expenditure as much, Britain would not have such a high rate of expenditure now and he would not have to take such severe steps to deal with it.
Most of the increases came in subsidies. I think that it is time that the Government said to the British people, "We shall give you a choice. We shall stop saying that you must pay additional tax because we have decided on additional public expenditure "That is what this Government are saying. Because they have put up public expenditure and because they cannot borrow any more money from capitalist countries without strings attached to it, they must put up the level of taxation.
There are many people who would prefer a lower level of taxation and a lower level of public expenditure. However, they have no choice in the matter. The Chancellor of the Exchequer is saying, in different words, what George Bernard Shaw once said, "Under Socialism, you will not get what you like, so you will have to like what you get". There will be no choice at all.
As for inflation, our record is much worse than that of other countries because they took steps to deal with it before. We did not. The Chancellor of the Exchequer has taken virtually no steps to deal with inflation and still has no strategy to deal with it. He is relying on a social contract which in almost every other sentence in his speech he pointed out was neither contractual nor social. It has borne very heavily on those who do not get the large increases in wages and salaries but who nevertheless will have to pay the increased prices and bear the increased burden.
When we come to borrowing, the Chancellor of the Exchequer has nearly run out of the good will of his overseas


lenders. The essence of his speech was, "They have seen me through up till now, but in future they will put strings on any substantial additional borrowings we make"
I come to some of the right hon. Gentleman's taxation measures. In the company sector, we agree about the need to get more investment. However, we are not likely to get more investment by small measures. It will come only by a change of attitude towards profitability and investment itself. We should have a programme of investing in success and saying to people, "If you invest, you will not only retain the value of your money but might get some interest from it." People would then invest. If we have a prices programme which stops companies from recouping all their costs and from getting a decent level of profitability, and if we have a dividend limitation programme well below the level of inflation, we shall not persuade people or institutions to invest if by doing so they take a certain way of losing money. There is money available to invest for a Government who believe in investment and who believe that the people who invest should have some reasonable return on their investment.
As for the right hon. Gentleman's stock appreciation measures, all that he has done is again to defer the tax to next year. He has not eliminated the tax burden on stock appreciations.
With regard to VAT, I believe that we had the best method in the world, having the single rate with the zero rate. There is no doubt that what the right hon. Gentleman proposes will represent a considerable additional burden on the shopkeeper and an additional administrative burden on Customs and Excise and will add to the costs of bureaucracy.
As for some of the right hon. Gentleman's other measures, one of the most severe is putting up income tax. Anyone shearing sheep stops when he comes to the skin. This is a lesson that the right hon. Gentleman has not yet learned. He is fleecing people practically down to the skin. I believe that people have virtually come to the end in terms of the additional taxation that they are prepared to yield to the Government. Although the right hon. Gentleman intends to keep down the rate support grant settlement, the rates may go up unless he has a better mechan-

ism of control on local government expenditure. He spoke of controlling programmes by their cost levels rather than by the policy level of programmes, and most of us would be glad to see that.
The tax reliefs announced by the Chancellor of the Exchequer do not take account of inflation to anything like the full extent. He has given reliefs of £50 on the single allowance and of £90 on the married allowance. In our view it should have been £117 on the single allowance and £163 on the married allowance to take inflation fully into account.
Naturally, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) will be opening the Budget debate tomorrow on behalf of the Opposition. I hope that he will be a good deal more cheerful than the Chancellor of the Exchequer has been today. Someone has to have a little hope for the future—[Interruption.] The Foreign and Commonwealth Secretary is muttering away. I remember him making a Budget speech in which he summed up his Budget as, "Steady as she goes." The present Chancellor of the Exchequer seemed to be saying that this one was, "Steady as she sinks."

5.58 p.m.

Mr. John Stokes: The Chancellor of the Exchequer has made his statement at a time when this once great country has about reached its lowest ebb. I doubt very much whether there will be a word about it in the foreign Press. We are indeed alone with our own troubles.
We have heard how the country is living beyond its means to the tune of 5 per cent., how inflation is running at more than 20 per cent., how wages are rising by 30 per cent. and how the Budget deficit has reached the colossal total of £9,000 million, while the pound is at an all-time low. Who could have foreseen such a state of affairs even a few years ago?
I do not blame all our troubles on the Chancellor. I acquit him in some measure for the moral decline in this country. However, the Chancellor has a great responsibility over many areas. First and foremost, he has not pushed back nearly enough the frontiers of Government spending and interference, and the


share which the Government take of the national wealth. The Government are still taking at least half of the national wealth in tax, although they are continuing to borrow and print money, thus stoking the fires of inflation. It was most noticeable in the Chancellor's speech that while certain taxes were to be increased in the near future, the cuts in Government expenditure—the nation's main requirement of the Chancellor—are vague, undefined and have been postponed till next year.
So much is wrong with Government expenditure that it is difficult to know where to start. However, national expenditure must be rolled back if the nation is to start paying its way again. Food subsidies should be abolished within 12 months. Housing subsidies and council housing should be phased out over a period of years. The Civil Service and local authority staffs could be cut immediately by about 15 per cent. without any loss of efficiency. Some hon. Members still need reminding that it is industry and business alone which create wealth in Britain. I am frequently reminded of this in my constituency, which is a wholly industrial area.
I am also frequently told by those on the shop floor as well as by those in boardrooms that there are too many unproductive people to feed in this country.
Public servants are being given increases in pay amounting to 26 per cent. per annum. How many, for instance, of the self-employed will have increases of that kind this year? Many of them, unfortunately, may find themselves having decreases of 26 per cent. in their income. The Chancellor has done nothing whatever for the small business man or the self-employed. Millions of pounds are being spent on education and on the proliferation of our education services at a time when many industrialists complain that a number of young applicants cannot write, spell or even speak properly.
It is defence, and defence alone, which bears the heaviest cuts and which bears them at once. As the Russian spy ships and submarines creep even closer to our shores and ring our oil rigs, we denude ourselves of the ships, aircraft and men to defend the vital interests of this nation.
The Chancellor had no message whatcever for young people, for all those who

have left school or university and who want to make a success of their lives and contribute to the well-being of the nation. More and more young business and professional people are becoming disillusioned with life in Britain and with the outlook of the Government. Almost in despair they are thinking of leaving Britain and making their careers abroad. These are the very people whom the nation can ill afford to lose. We shall dilute our national stock if we continue to lose these people and take instead immigrants, with all the extra costs that they involve, apart from the many other problems.
The Chancellor briefly mentioned the social contract, which was only an election gimmick anyway. However, the contract has failed. Perhaps the Chancellor is now the only member of the Government who can do something to curb the power of the great monopoly trade unions. Unless their powers are checked, not only shall we have inflation running at a rate of 20 per cent. or more annually, but parliamentary government may become increasingly threatened. I am glad that the Chancellor has not wholly given way to his Left wing, who listened to his speech with a noticeable amount of coolness. After all, it is they who want nothing less than to destroy our institutions and our democratic way of life.
England cannot survive if we have a dose of full-blooded Socialism with an economic and financial crisis. Somehow we have to bring back a sense of unity and cohesion. Conservative Members would like to see rewards go to those who try, who take risks, and who make the effort, and some discouragement of the amount of envy and greed which we hear so often from Labour Members. The Chancellor should state even more categorically that industry is an honourable calling that alone creates wealth in Britain and out of which everything else is financed. The Chancellor should put economic curbs on the unions to ensure that at least their practices really are democratic, unlike, for instance, the dockers, the subject of our debate yesterday.
There is nothing wrong with the ordinary working man in Britain. but he needs a lead from the Government as well as from his employer and his union.
I know full well that many people work very hard. However, in certain industries productivity and labour relations are simply appalling.
There was little mention in the Chancellor's speech of the EEC. It is becoming more and more apparent that many of the Chancellor's colleagues are opposed to the EEC because they fear the competition involved. Unless the British people can try as hard as the French and the Germans, they will simply not survive. If those nations can do it, why cannot we? I appeal to the Chancellor to put his patriotism before his Socialism.

6.10 p.m.

Mr. Arthur Lewis: I do not know how many Budget speeches I have listened to over the course of about 30 years. It used to be one a year. Then the average became two a year, and I am not sure that it is not now about three a year. I suppose that I have listened to about 40 Budget speeches. I have listened to all types of persons delivering the Budget speech. I have listened to men—I believe to men alone—of the highest integrity and the greatest ability. They have come from the legal profession, from Customs and Excise and from the Civil Service—indeed, some have become bankers.
Every time I hear one of these Chancellors, of whatever party, he has always "just got it right". These Chancellors know that they have acted according to their budgetary demand, by doing this, that and the other. But then comes the next year and the next Budget, delivered by another Chancellor, who says "Of course, we now have to do it differently from the way that we did it last year because we were not quite correct. We were wrong in our estimates."
I happened to be standing by the Chair, Mr. Deputy Speaker, for most of the Budget speech today, I was listening to the mutterings that were to be heard from the Opposition—what I term the interlocutory remarks, in the interlude which precedes the Chancellor's reaching the guts of the Budget—the interlude formed by what I term the Treasury briefing.
It makes no difference who the Chancellor is; the Treasury knights and advisers draw up all these prognostications, ideas and suggestions. Within a general sphere,

the Chancellor may have the opportunity of putting in one or two items, very often after many months or years, during which he should have acted. He does act. but very often it is too late.
I pay tribute to my right hon. Friend the Chancellor for dealing at long last with Krugerrands—but how many approaches have been made to him over many months about this matter? Why has it taken so long to do this? If this action is right, as I believe it is, why did he not deal with the matter last year? Why was it not dealt with when the stable door was being opened, and before the horse had bolted? Why did he not lock the door previously?
Again, with regard to increased taxation and tax dodging—be it by the "lump", or anything else—why does it take the Treasury experts so long to get cracking on these matters? It is they who call themselves experts. I do not have much regard for their expertise or expert knowledge. It is right that the "lump" should be dealt with. But for how long have we been listening in the House to talk of the abuse of the "lump".? It has been years.
The Chancellor is to raise the excise duty on road vehicles to £40. However, he and his Department know about 20 per cent. of vehicle owners do not pay the £25 duty now. What does he do about that? Not a thing. He knows that there is a very high pile of correspondence about people who have deliberately, year after year, refused to pay the £25. The Chancellor of the Exchequer and his Department, the Department of the Environment and the various enforcement departments have been asked to take action. Have they done so? No. What we find now is that the law-abiding citizen who religiously pays his £25 will see that sum rise to £40, but the many people who have been driving around the streets during the past few years and who have never paid a halfpenny will laugh because they will be able to say that instead of saving £25 they will save £40.
I have tabled Questions on this matter. I received one reply only last week. Thousands upon thousands of cases have been reported, but they are the tip of the iceberg. There is a farcical situation in which, if a person happens to be caught after many years, he can offer to


pay a mitigated penalty. He pays one-quarter of the arrears and then he is let off the remainder. This makes it a profitable proposition. I cannot see why the Government should increase taxation on those who do pay the duty until they do something about those who do not pay. I am seriously telling the Chancellor that if there should be a vote on this matter I doubt whether I shall support him.
The same thing applies with regard to tax avoidance. For how many years have I heard Chancellors, of both major parties, saying that they will deal with tax avoidance, and so on? No action is taken. There is still a profitable side of dodging taxes, because only some of the loopholes have been closed.
The hon. Member for Halesowen and Stourbridge (Mr. Stokes) mentioned dockers and other workers, and said that some were disrupting the country, and so on, but I have never heard a voice from the Opposition condemning tax dodgers who flee the country and claim to be patriotic. Incidentally, they wait for their knighthoods or OBEs or CBEs before going. These great patriotic gentlemen fly off to the Channel Islands, Jamaica or the Bahamas, or wherever they go, and then issue statements saying how wicked it is that the workers will not work to produce the goods, and so on.

Mr. Gordon A. T. Bagier: What about the pop singers and golfers?

Mr. Lewis: Yes, those too, but I am more concerned with the great industrialists who remain here until they get their knighthoods and then flee the country, having made their money. Hon. Members of the Opposition say that we ought to let them have a vote in the referendum on the Common Market. I do not want them to have that vote. If they do not wish to pay taxes here—if this country is not good enough for them and they want to take away their money—they should have no rights at all to vote on the Common Market.
The hon. Member for Halesowen and Stourbridge mentioned the Common Market and the Chancellor's attitude to it. All of the people who have gone to

take up lucrative jobs in the Common Market are doing very well, and at the British taxpayers' expense. Every one of them who has a job over there has tax-free perks. He gets a house, a rent allowance and a household decoration allowance. All this is paid for by the British taxpayer. Perhaps the hon. Gentleman, when he is attacking the dockers for asking for extra wages, will tell to my friends the dockers, when they are asking for a 20 per cent. or 30 per cent. increase, that if it is wrong for the docker to have an extra £10 a week—it may well be—it is equally wrong for a Member of the House to get £30 or £40 a day tax-free by attending a so-called European Parliament—sums paid for by the British taxpayer—in addition to receiving his money while he is not here.
Some of the hon. Members who criticise the workers are able to get the equivalent of £30 or £40 a day tax-free. In some instances, if it were grossed-up for tax purposes, it would be worth as much as £100 a day. These Members come here only very occasionally, and say "If only these wicked workers and strikers would get down to it and stop asking for too much."
I recently asked a Question of the Chancellor about the allowance of the noble Lords in the other place and what it was worth to them on a tax-free basis. My hon. Friend the Minister knows that they get £11·50 per day tax free. I do not know if he knows that for some this works out at £67·90 per day. If we work that out for a five-day week we find that it comes, in round figures, to about £300 per week. It is very nice for those noble Lords to speak in the other place about the wicked dockers, the wicked busmen, and the wicked miners—how dare they ask for £50 or £60 a week?—conveniently forgetting the fact that they themselves are drawing the equivalent of £300 a week from the same taxpayers.
I heard my right hon. Friend talk about the inflationary wage spiral and inflationary wages and say that something will have to be done about them. Very good, but I have not heard one right hon. Member from either side of the House say one word of condemnation of the top-rate civil servants who, every year, get a 20 per cent. or 30 per cent. increase in their not inconsiderable salaries. Only yesterday, I think, it was announced that


there was to be another 32 per cent. increase for civil servants. I am not attacking them. God bless them, may they be worthy and deserving of this. But it was Sir William Armstrong, when he was head of the Civil Service, who helped to frame the so-called wage freeze and the so-called incomes policy. It did not affect him, mind you. It was a wonderful thing for others, but it did not affect him.
Indeed, the former Chancellor, now Lord Barber, became a bank director. He was in favour of the wage and salary freeze. Did he say to his bank, "Look here, old boys, I have earned quite a lot as Chancellor of the Exchequer and I said we should not have too much in the way of salary incomes because it is bad for the economy, so having now become chairman of this bank I want only a nominal income"? He did not. I have read that he is getting £20,000 or £30,000 a year.
We often find that Chancellors, whatever their party, make great pleas to the poorer, ordinary type of worker to go easy. I am going to suggest to the Chancellor and the whole of the Treasury Bench a way in which they can bring home to the people the grave situation from which we are suffering. I suggest that Treasury Ministers who, in addition to their salary, are now getting a house, coal, fuel, light, furniture, carpets £indeed everything that goes into the grace and favour houses which may be worth £15,000 a year, tax-free—should say: "We are now going to give all that up and live on our ministerial salaries and not take all these extra things for which the taxpayers have to pay, since we are now calling for some degree of restraint."
I could then go to my dockers and tell them that the last Government—all those Tory Ministers—lapped it up and lived in luxury at the taxpayers' expense, in addition to their vast incomes and not inconsiderable salaries, but that my right hon. Friends had now shown how democratic they were by giving up those grace and favour establishments. I am glad to see that the Prime Minister has—I believe—ceased to live in Downing Street. That is good. I understand that it now consists of offices. That is good. I should like to see the other houses, such as that which is occupied by the Chancellor of the Exchequer, given up. I do not mean his house in Sussex, which is his own,

or the house he has in Hampstead, which I am told he is letting and getting an income from. Those he can keep. But I do not think he needs to have a State house provided for him at the taxpayers' expense. Let him say: "I am now putting on extra taxes and I want the people to know that this house will now be used not as a private home for a private Minister but as offices." Indeed. he might well be able to put some of the Customs and Excise people into those offices and help them to draw the extra tax.
So often in this House the call goes out to tighten the belt, but it is the belt of others, and invariably of the poorer paid. The hon. Member for Halesowen and Stourbridge laughs, but the point I am making is this: the Chancellor spoke of the high rate of tax–98 per cent.—but I am prepared to gamble that every docker. every engineer, every platelayer, every railway worker, every worker who works with hand or brain, would willingly pay 98 per cent. tax if he had the net result of the money left. But many of them would have no salary at all; they would have to live on the "perks".
A company director once boasted to me that he never drew one halfpenny in salary from his company. When I asked him how he lived, he said: "The company supplies me with my flat. I have a hotel arrangement wherever I go. I have a car and a chauffeur, and I have luncheon expenses. and so on." By the time this was all added up he was getting about £15,000 a year tax-free. This is still happening, I am told. The hon. Member for Halesowen and Stourbridge shakes his head. Let him go down the road and into the first hotel he finds—I think the Savoy is the nearest—and ask them how many companies have suites and rooms for entertaining there, and how many have an arrangement whereby the directors of the companies have accommodation there.
It is quite unfair, to my way of thinking, to castigate and attack the ordinary, poorer-paid worker—or, indeed, the better-paid worker—and then conveniently forget one's own position. I have a clear conscience. I have never attacked them. So, when people say, "What about you?", it is all right. The point I am trying to make is that I am all right, Jack.
I say it so often. I declare it. I am all right.
If my hon. Friend the Member for Sunderland, South (Mr. Bagier) walks out of this Chamber at this moment the first hon. Member he meets will probably be a lawyer, or will be connected with the law. How often, when there has been a question of industrial disputes or strikes, have I listened to some great QC—there may be some sitting opposite now—talking about the wicked workers asking for too much salary income? Then I find that these lawyers are getting £10,000, £15,000 or £20,000 a year, and what I think they call a 50-guinea, 60-guinea—or is it 100-guinea per day?—refresher. Talking about restrictive practices—there is no industry or profession in this country which is so restrictive as the legal profession. We see it in this House, do we not? I am not indulging in party politics; the argument applies to both sides.
There are lawyers on both sides of the house. They pair off to do their legal work, because that is better paid than their job here. I do not blame them for this. They so arrange it that they can keep the cases going, because the longer they are kept going the more they earn. I say "earn", but that is a bad word. I should have said "the more money they get". The longer the case goes on the more money they get—the more refreshers, the more fees. But those same hon. or hon. and learned Members, who say that engineers and railway workers—I am glad to see my hon. Friend the Member for Sunderland, South, who ably represents railway workers—should not ask for £2 or £3 a week extra for night or shift work or when they are away from home, do not reveal that they are getting £25, £30, £50 or £100 a day in refresher fees.
I hope that my right hon. Friend and Treasury Ministers, when they start attacking high wage rates, as the Chancellor did, will say at least one little word—which I have not heard today—about some of the most highly paid company directors, earning £20,000, £30,000 or £40,000 a year. I have sent company reports to the Treasury—they are on record—during both the previous Labour Government's wage freeze and the period of the Tory Government, showing that company directors were increasing their

salaries and fees by between 20 per cent. and 40 per cent. year after year. Has any action been taken? No. Apparently the Treasury cannot do anything about them because they are company directors.
I do not recall my right hon. Friend's saying that we must make an appeal to the most highly paid people. Therefore, I do not feel that I can ask a dustman, who does a hard, laborious, dirty job, not to ask for his £2 or £3 a week, and to cut down on his demand, knowing that some knight in the Treasury and his advisers are getting double, treble and even quadruple what that dustman is earning and is arranging for some judge—indeed, not some judge—but himself—to get a doubling or trebling of his salary. If my right hon. Friend and Treasury Ministers were to do something about the inequalities in our society, I should be much happier.
I am a little worried about my right hon. Friend's reference to the control of public expenditure, which he did not spell out. Public expenditure will be cut. I know this from experience over the last 30 years. Invariably, when any Government start on public expenditure cuts they land on areas which can least afford them, and usually on the more essential types of public expenditure.
For example, is education to feature in these public expenditure cuts? I do not know. There are schools in my constituency which were condemned 150 years ago, but we have been told that we must put up with them. There are classes of between 40 and 50 children in those schools, and not enough teachers. Indeed, the situation is such that even though it is against the law, schoolchildren in my constituency have had to go on a three-day week. I am not referring to the three-day working week which the Tory Government introduced because of their confrontation but a three-day week for education, because the children cannot get full-time education. Because there are not enough schools or teachers, children have to be bussed out to neighbouring areas. Again, I ask: will expenditure on education be cut?
The Chancellor, although he did not go into detail, said that there were to be some cuts in housing. What cuts does he mean? Where will they be operative? Will they be made on the basis of need?
Some people in my constituency have been waiting 30 years for council houses. Some are still living in temporary Nissen huts and others are still living in Portal houses which were introduced for two- to three-year periods during the war. Between 10 and 12 families—as many as 30 to 40 people—are living in houses which should be for only one or two families. There is a big immigrant problem in my constituency, which adds to the difficulties.
My area is one of the highest rate payment areas in the country. Therefore, will the Chancellor, when he considers these cuts, apportion them out? By all means, stop house building in Bournemouth, Boscombe and Bath, and other salubrious neighbourhoods. Let them get on with private house building. Let us stop council building there. But in areas of great need and stress, such as my own, let us try not to cut; let us try to give some assistance and make some improvement.
Lastly, I ask the Chancellor to consider whether a system can be devised which will not only combat inflation but siphon off and channel some of this much-needed money into areas of dire need such as my own—there are others in the East End of London and elsewhere—to improve housing and employment with the provision of factories and workshops and at the same time control the wasteful expenditure that is now going on.
My hon. Friend the Minister of State knows that it is possible for people to get all the luxury buildings and Rolls-Royces that they want, but it is difficult to get some of the essential jobs done because of the shortage of cash and labour. Therefore, I ask my right hon. Friend, when he starts to put some of these restrictions on capital expenditure into operation, to ensure that he does not again savagely hit the already adversely affected areas. Indeed, he can take it from me that he will not get my vote if there is another regressive attack on the poorer areas of this country.

6.38 p.m.

Mr. David Mitchell: Perhaps for the only time in this House I may find myself joining Members of the Tribune Group in asking the Prime Minister to sack the Chancellor of the Exchequer. We have listened today to a

speech in which the Chancellor has admitted his own failures and the way in which he has made the situation worse. For example, he has increased taxation by £1,000 million, but he started by admitting that consumer demand during the next 12 months will be boosted by the £1,000 million which he pumped into the economy last year in his July and November measures. Thereafter, we had a long, turgid, depressing and typically Socialist Budget with no inspiration, no incentive, and full of lost opportunities. For those reasons I think that many hon. Members on both sides of the House, if I judge aright the reception with which the Budget was greeted, will wish to see the right hon. Gentleman's swift departure.
I would like to look at the economic situation which faces the country, the Chancellor and this House, and which we have to tackle. It is a position in which we are suffering from an inflation-led recession, an export downturn-led recession and an investment-led recession. One asks what those three things have in common. What they have in common is that each of them is related to an inadequate amount of capital behind each worker. It is that that I wish to talk about this evening. Perhaps it is also true that it is related to the fact that we have an anti-capital Government, and it is small surprise that a Government who have taxed and overtaxed capital should find themselves in a position where insufficient capital is being invested in British industry.
Let us look at the question of inflation-led recession. The Chancellor spelled out very clearly that this was the situation facing us, no doubt due to the failure of the social contract—and he himself admitted as much in his remarks—which was central to the economic policies of the Government and which we were promised at the time of the General Election would be a panacea to cure all economic ills. Now the Chancellor of the Exchequer stands up and admits its failure and he has nothing else to put in its place.
The trouble is that increased wages are being paid but are not being earned. I do not say that at all unkindly to the dockers whom the hon. Member for Newham, North-West (Mr. Lewis) represents


or to any other group in the community. Because it is not by working harder that we can earn more: we can do so by producing more, and that means by having more capital behind each worker. We need to see each worker bringing in more money to his company so that there is more money to pay to him in wages and more for the growth of the company itself. There is no question that the key here is more investment per worker.
Let us move to the fact that this is an export-led recession because British exports are not as competitive as one would wish them to be; and this in spite of an effective devaluation since the time sterling was in the snake of 21 per cent. There has been this very considerable devaluation and still we are not competitive in many markets of the world. The reason, again, is that our costs are too high. Expensive labour costs are too high a proportion of our manufacturing costs and industry's overheads.
We must recognise that the amount of time that industry has to spend on the overhead of complying with regulations has become so great that it is a major cost in any company's operations. I would, with respect to hon. Members of the House and to you, Mr. Deputy Speaker, suggest that the biggest single contribution the House of Commons could give would be an undertaking not to legislate for 12 months. I can think of nothing else which would give greater easement to industry and to many other people in this country. The overheads of industry are increased enormously by the high level of tax necessary to maintain the non-trading, non-productive part of the country's economy. Again, the answer is to cut the tax, cut the overheads, and invest more per worker in machinery, equipment and modernisation.
Thirdly, I said this was an investment-led recession, a major turndown in the investment intentions of industry. This has two effects. First, there is a recession in the companies which manufacture goods and equipment for investment in industry for its modernisation of factories and equipment, but there is a second effect, the effect on those industries which have not spent money on modernisation and find it increasingly difficult to com-

pete in world markets. Here, again, there is a need for increased investment.
How has it come about that we have this recession in investment? It is obviously the key to the problems of the British economy. First, we had a Chancellor of the Exchequer who 12 months ago removed a large sum of money from the corporate sector by increasing corporation tax. It was rather like a surgeon saying to his patient "I am sorry that this operation is going to be painful. I am going to have to remove your wallet". What happened to industry was that investable funds were removed by the Chancellor last year. That was the first thing, the Chancellor playing the role of asset stripper and stripping industry of essential funds for investment.
Secondly, on profits, we cannot have the funds for investment unless it is possible for firms to make a profit and to accumulate funds. Many people seem to think that profits are what the boss goes off to the south of France with in his yacht. They are nothing of the kind. Profits are mainly ploughed back into business to enable it to buy stock, new machinery and equipment. Clearly, the current level of profits in British industry is too low, and the Government should be doing something to help, a point to which I will come later.
Thirdly, investment is low because of the uncertainty about the European Economic Community and whether we are to remain in it. What is the answer to this, so far as investment is concerned? First, I believe we should end profit control because industry has to earn good profits if it is to invest in its future. The NEDC report last week suggested that the profits of industry should be a 20 per cent. return on capital at the present time, to take account of inflation. I know that the Government, as their own recommendation, have suggested that its suppliers should have a profit of 22 per cent. Be that as it may, it is something of that order, and yet, when that is the Government's own advice about the level of profits which should be made by industry, so that industry can accumulate funds for investment, the profit control which the Government are operating is preventing companies from making that kind of profit.
My second point is that I believe it would be right for the Government to make it worth while for industry to earn profits by cutting corporation tax. It may be asked, how are we to pay for that? Much more vigorous cuts should be made in Government expenditure, and I would draw attention to one very important factor, that high taxation in the corporate sector leads to profligate expenditure by management; because every time a management is considering whether it should have a prestige office, a Rolls-Royce for the chairman or whatever it may be, those who are concerned say "One-half or more than half of this will be paid for by the Chancellor of the Exchequer. It is not coming out of the final net profits of the company." The higher taxation goes, the more this artificial distortion exists. It seems to me there is a very strong case for looking at the whole idea of taxing companies with corporation tax in the way they are taxed today.
Finally, the Government have recognised the need to try to do something about investment. I suppose they have been trying with the Secretary of State for Industry, with his various measures. I have to say to him that he frightens away more than he brings in in the form of investment. It is very much like trying to encourage a rare bird into one's garden and putting a scarecrow beside the place where one is putting down corn to try to attract the rare bird. While we are so desperately trying to encourage investment and capital to come to this country we have the right hon. Gentleman the Secretary of State for Industry and his activities driving it away.
There is no super breed of civil servant able to say to management "This project you should provide ivestment for; that you should not". There is no possibility of the Secretary of State for Industry or his Department being able to make the innumerable decisions that management are called upon to make. The reality is that we should subsidise industry less in the way of grants and the like, and tax it less. We should leave it with the profits it makes, and leave it to the judgment of managers on the spot as to how those profits are to be invested.
Perhaps most important of all is the point which has been so sadly missed by the Chancellor, that if he wants more

investment and more capital behind each worker he must stop taxing capital and taking away from the productive side of the economy by means of the capital transfer tax, the capital gains tax, the wealth tax and all the other taxes which he has introduced and increased. It is essential that he stops taking this money out of the economy, because only in that way will he create an economy in which pople have the confidence to invest their money in industry, to put behind each worker that additional investment which is desperately needed.
The effects of the right hon. Gentleman's policies have been to discourage savings and to destroy the motivation of the business community. For these reasons, and the failure of the Chancellor of the Exchequer to create the necessary incentive, I believe that the House should condemn him, and that the Prime Minister should sack him.

6.52 p.m.

Mr. Gordon A. T. Bagier: The hon. Member for Basingstoke (Mr. Mitchell) concluded his remarks by saying that the House should condemn the Chancellor. If the hon. Member wants to condemn the Chancellor because he has taken a realistic view of the state pf the country I suggest that he thinks again.
I concede that this has been a sombre Budget. The trouble is that the headlines in the newspapers and on the television news will be that a drop of Scotch has gone up 64p a bottle, that beer has gone up 2p, and that road tax on motor cars has increased from £25 to £40. Those are the things which basically affect most people. The trouble is that the economy is in a dreadful condition. We are now suffering because we have been paying ourselves too much for doing too little, but I believe that the answer lies somewhere farther afield.
One Conservative Member spoke about cutting back on council house building and on the things which affect ordinary people. I believe that he is living in a fool's paradise. This question about public expenditure needs to be carefully analysed. It sounds marvellous to say "Cut back public spending", and we all say that it should be cut, but what does it mean? It means cutting expenditure on the very items which figure most prominently in our letter bags. I have


said to the people in my constituency that if they do not believe in public expenditure they must stop writing me letters asking for schools, roads and other things which affect their everyday lives. if people do not believe in public expenditure and in providing the money for it they must not expect the goods to be delivered.
I am worried because in the Budget I detected no sign of how the Chancellor's proposals will protect the area which I represent. When hon. Members talk about public expenditure they should think in terms of a region area like mine where, in Sunderland, there is male unemployment of 10·2 per cent. They are talking about cutting back on school building and road building and on rehousing those who live in the slums of my constituency. They are talking about cutting back the construction work which could provide the unemployed with jobs.
Last weekend I visited St. Aidans school in my constituency. The buildings there are Dickensian, to say the least. They are a fire hazard, a trap. They should be closed, and I think that they will be, but phase 3 of the building programme for that school, which includes a complex to accommodate the pupils, has been suspended because, I assume. public expenditure cannot be provided to meet the cost. I shall certainly be pressing my right hon. Friend the Secretary of State for Education to resolve this matter, and I have no doubt that other hon. Members facing similar situations will do the same. We must have adequate and proper education for our kids.
I visited a science laboratory which was used by first-year science pupils. It has a wood floor and is reached by a wooden staircase. It is a hopeless fire hazard. We have to put up with these inadequate facilities because public expenditure has to be cut back. Hon. Members talk about cutting public expenditure, but they do not think what it means in practical terms.

Mr. Teddy Taylor: Does the hon. Member accept that he could have more schools in Sunderland and elsewhere in the country if the Gov-

ernment were to cut back public expenditure by saving the £1,000 million which is to be spent on nationalising North Sea oil and other nationalisation proposals?

Mr. Bagier: I do not agree. The hon. Member is talking about cutting back public participation in the profits from Noth Sea oil and gas. Why should the multi-national companies enjoy the profits of the North Sea as they are enjoying the profits from other parts of the world without consideration for the country in which that oil is found? The hon. Member deviated from the point. I was making. In the Budget the Chancellor must get his priorities right, and that does not necessarily mean cutting back expenditure on these items.
The hon. Member for Basingstoke spoke about investment potential. Part of the trouble with this country, particularly under the last Conservative administration, was that the money the hon. Member was talking about was invested in land and property speculation and not in manufacturing industry. That was done because the profit prospects were more attractive.

Mr. David Mitchell: It was the Conservative Government's failure to reduce taxation on the business community and on industrial companies which created that situation.

Mr. Bagier: The fact remains that the money was being wrongly invested.
I see from the signs being made at me that I have one minute left. I conclude, therefore, by saying that I am sorry that, in view of the situation of the motor car industry, my right hon. Friend the Chancellor chose to increase road tax for motor vehicles across the board to £40. Cars should be taxed according to their size. I cannot see that it is right for a Rolls-Royce to be taxed the same as a Mini. I hope, therefore, that my right hon. Friend will bear that point in mind in future.

Debate adjourned.—[Mr. Walter Harrison.]

Debate to be resumed tomorrow.

Orders of the Day — SCOTTISH DEVELOPMENT AGENCY BILL

Order for Second Reading read.

Motion made, and Question put, That the Bill be referred to the Scottish Grand Committee.—[Mr. John Ellis.]

Whereupon not less than ten Members having risen in their places and signified their objection thereto, Mr. DEPUTY SPEAKER declared that the Noes had it.

Bill to be read a Second time tomorrow.

PRIVATE BUSINESS

LONDON TRANSPORT BILL

(By Order)

Order for Second Reading read.

Motion made, and Question proposed, That the Bill be now read a Second time.

7.0 p.m.

Mr. Bryan Davies: I am introducing the Bill on behalf of the promoters. In these somewhat tempestuous days one is prone to make a few predictions about politics in Britain, but I could have ventured upon a fairly safe forecast today. I could have predicted that my right hon. Friend's Budget would be listened to with rapt, if not wholly admiring, attention by a full House and that the introduction of Private Business at Seven o'clock would have a calming and somewhat denuding effect upon the Chamber. This effect is not entirely unwelcome to the promoters of the Bill. They, with me, would wish for a calm and unemotional atmosphere in which the Bill can be given fair and proper consideration.
The promoters are not averse to hiding their particular lights under a parliamentary bushel. We are all aware that good work can sometimes be done by stealth. The Bill represents a programme of good and essential works.
Each Session the London Transport Executive, which is responsible for the operation of the largest urban passenger transport undertaking in the world, pre-

sents a Bill to authorise the construction of railway works and for other miscellaneous purposes. The Bill contains provisions to improve the operation of the two major components of the work of the London Transport Executive—first, a series of works related to the Underground railway system, and, secondly, the acquisition of lands to extend the capacities of certain London bus garages. The works require the authority of Parliament, because without it they would in law be nuisances, especially where some of the works involve interference with the use of the highways.
The Bill follows the usual practice of seeking the necessary statutory authority both for the required works and for powers to obtain the necessary land by compulsory purchase. The Bill is lengthy, but it does not contain involved principles.
I must at this stage refer to some of the major clauses of the Bill and their merits.
Part I contains the interpretation and incorporation of general Acts, while Part II authorises the construction of certain railway works in Greater London. Those works are detailed in Clause 5, which may be the subject of certain representations here. Details of the works were deposited with Parliament at the same time as the Bill. London Transport has inevitably been involved in extensive consultations with the many interests affected. The validity of the works requires limited discussion.
Work No. 1, at King's Cross, represents the addition of a significant facility to commuter transport. It provides for the construction of a new ticket hall at King's Cross Widened Lines station and an interchange with the Piccadilly and Victoria lines. The work is part of the programme which will provide a direct electric service by British Rail from Bedford to Moorgate.
Several other works which are detailed in Clause 5—those at Highbury and Islington, St. Paul's, Tooting Bec, Marylebone, and Warwick Avenue—involve improvements to the system of ventilation and draught relief. The ventilation problem in the operation of the Underground system is, I am sure, appreciated by hon. Members, but it may come as a surprise that draught relief is a great


problem. Without sufficient alternative exits the amount of air pushed by trains passing through tunnels into certain stations is such that severe discomfort can be caused to passengers. London Transport's aim is to keep such air speeds in escalators down to between 10 and 15 miles per hour. If effective draught vents are not constructed at stations, passengers may be faced by a minor gale of more than 30 mph. I am not sure, in terms of meteorological forecasts, what that would represent—perhaps a Force 4 or 5 gale—but the discomfort can be imagined.
The work at St. Paul's station involves digging into the foundations of the most historic part of the capital. There is the possibility of medieval ruins being uncovered by the operation. London Transport is engaging in detailed discussions with the City of London to ensure adequate protection of any works of significant historic interest which may be revealed during excavation.
Work No. 5, at Baker Street station, and Work No. 6, at Bond Street station, are in response to the extra demand for facilities caused by increased passenger traffic from the completion of phase 1 of the Fleet Line.
Clauses 6 and 7 authorise temporary interference with certain main streets in connection with some of the works which I have already outlined.
Part III contains the compulsory acquisition by the Executive of land, subsoil, easements and rights for the purpose of the railway works and for improving certain bus stations which are identified later in the Bill.
The Bill does not deal in detail with compensation for land authorised to be acquired or injuriously affected, because the Land Compensation Acts of 1961 and 1973 apply automatically once Parliament authorises the acquisition of the land.
Clause 9 enables the Executive to acquire compulsorily such of the lands shown on the deposited plans as it may require for the purpose of the works. It is under this clause that all surface sites required for railway and other works are acquired. The clause is qualified by Clauses 10 and 11.
Clause 10 enables the Executive to acquire subsoil and rights beneath the

properties set out in Schedule 1 of the Bill, and does not preclude the possible acquisition of surface properties under Clause 9. The function of the clause is to prevent the Executive from being compellable to acquire land from the depths of the earth up to the heavens. Therefore, it may acquire only an underground stratum of land.
Clause 11 specifically excludes the Executive from acquiring properties above the level of nine metres below the surface.
Without Clauses 10 and 11 London Transport would have to have property rights on surface properties wherever its underground rails ran. The mind boggles at the implications of that possibility. It may be of some small comfort to hon. Members to know that London Transport has no intention of being the only intermediary between the earth beneath and the heavens above.
Clause 12 concerns the acquisition of land and the power to carry out certain works on the land. The land involves four London Transport bus stations—Hammersmith, Norbiton, Norwood and Streatham. The provision of these new bus garages and depots is part of the Executive's continuing programme of bus garage modernisation. The garages require alterations for a number of reasons.
First, hon. Members will remember the debate before Easter, when we identified London Transport's requirements for the new type of buses. We discussed the whole question of the guarantee of spares and supplies. There was a limited range of options open to London Transport as to the kind of buses it could purchase. One of the distinctive features about the new range of buses is their size. This may have advantages in certain spheres of operation, but one difficulty is the capacity of garages to accommodate the larger buses, which demand 15 per cent. more space than the buses which they replace.
The larger garages will also provide improved working conditions for staff. In particular, in the modernisation of the garages it is the intention to reduce the number of maintenance crews forced to work in the open air in all weather conditions. There will also be improved car parking facilities at the larger garages.
London Transport crews starting work at unsocial hours in the morning and often finishing at unsocial hours at night require private transport. There is also the possibility of a limited amount of staff housing.
It must be welcomed that in the improvement of the garages part of the priority is identified as being an attempt to improve the facilities for London Transport staff. Many of us have been conscious that one of the major difficulties in London transport provision has been the inability to attract sufficient staff to operate all the facilities.
At Hammersmith a major enterprise is to be embarked upon, involving rebuilding the Riverside Garage, reconstruction of the Underground ticket hall, and provision of a road and rail interchange centre designed to integrate with the new road scheme to be constructed by the GLC. The Executive assures me that it has met the GLC to ensure that its work does not limit the GLC's capacity to introduce a road scheme which most effectively meets the needs of the area. I mention that in particular, because a local amenity society has been active in the area to safeguard the environment. I am sure that all hon. Members will welcome the fact that extensive consultations have gone on to ensure that the works do not jeopardise the best form of transport system for the area.
In the extension of the other garages, limited acquisitions of property are felt to be necessary. The number of private dwellings affected is extremely limited in each case. The Executive has been in prolonged consultation with those owning property rights to ensure that fair and agreed compensation is awarded.
I know that hon. Members are concerned that their constituents should have every assurance of fair compensation for the disturbance. London Transport also hopes that the net loss of housing resulting from the construction of the garages will be partially ameliorated by the provision of extra accommodation for staff on the sites of the garages.
Clause 13 is a straightforward clause laying down a time limit of three years for the exercise of powers for the compulsory purchase of lands and easements.
Clause 14 lays obligations on the Executive in respect of certain consecrated land. This is in connection with the

work at the St. Paul's station. The purpose is to free the land from legal restrictions arising from the fact that it is consecrated. The work will be conditional upon the removal of human remains to other consecrated ground and arrangements whereby the interests of people who may have relatives interred in the graveyard can be protected.
Part IV introduces a range of protective provisions, Clause 17 in respect of the Metropolitan Police, public utility undertakers and the Crown, and Clause 18 particularly in relation to the works of the Thames Water Board The previous legislation on draining and waterworks is now out of date consequent upon the Water Act 1973.
Clause 19 safeguards the rights of the GLC, as in previous legislation of this kind.
Part V contains a range of miscellaneous provisions. Clause 21 is important, because it is a major provision to ensure that planning blight is as limited as possible in the development of the Executive's work. It limits the Executive to a certain period in which to acquire an interest in land or give up its power of compulsory acquisition.
Clause 22 is of some significance, because it involves a relationship between the London Transport Executive and the British Airports Authority. The point at issue is the fact that part of the concourse of the London Transport station at Heathrow is intended to be kept open at a time when the railway station is closed. The clause makes clear the responsibilities of the two authorities in respect of the central concourse area.

Mr. John Page: As the hon. Gentleman is so extraordinarily well informed, can he give any indication when the work is expected to be completed, or perhaps when it is to be begun?

Mr. Davies: I cannot give a specific reply now. It is certainly four to five years away, but I shall try to obtain a more accurate answer before the end of the debate. Discussions are going on between the British Airports Authority and London Transport, and there is every hope that the arrangements will be satisfactorily concluded in the not-too-distant future for work to start as soon as possible.
Clause 23 is a major exclusion clause, making sure that nothing in the Bill exempts the London Transport Executive from the normal operation of planning legislation as it obtains now.
On the basis of those many and varied clauses, particularly the safeguards written into the Bill, I believe that the Bill is of considerable merit on a range of issues, and that it will be of great advantage to London Transport and the facilities it offers to constituents of hon. Members in the London area. Therefore, I commend it to the House.

7.17 p.m.

Mr. William Shelton: Any London Member of Parliament will very much welcome the overall objectives of the Bill, so ably expressed by the hon. Member for Enfield, North (Mr. Davies).
I wish to deal with a specific constituency matter and to explain why my name has been associated with that of my hon. Friend the Member for Ealing, Acton (Sir G. Young) in putting a block on the Bill over the past few months. I refer to Clause 12, dealing with the enlargement of the bus garage at Streatham, which will entail the destruction of about nine houses. I appreciate that not many houses in total will be affected by the Bill. Nevertheless, when a person's house is affected he or she possibly regards it as the end of the world. Instead of thinking how fortunate it is that only a few houses are affected, such a person thinks "How terrible it is that my house is affected!" In fairness, I should add that two of the nine houses are already the property of the London Transport Executive, so we are talking about seven.
As there is no normal compulsory purchase order procedure in private legislation such as this, and no public inquiry is taking place in Lambeth, when my constituents came to see me about the matter I felt that it was my duty as their Member of Parliament to look into the matter and to satisfy myself to the best of my ability that it was essential that the houses should be destroyed. It seemed to me that certain questions needed to be answered. I pay tribute to the London Transport Executive for the co-operation it has given me in answering them.
The first question was whether it was necessary to enlarge the depô t. I have been convinced that it is. It is not only a matter of the larger buses that need to be serviced there. As the hon. Gentleman said, the enlargement will result in better facilities for the staff. We have had big problems of violence on the buses in our area. We must do anything that can be done to make life easier for the staff who work so well in London Transport.
The next question I had to ask was whether the but depô t had to be on the proposed site. It is a big question, which silenced those to whom I put it. There is an ugly derelict site not far from the present bus depô t on which I have been trying, so far in vain, to have some improvement made. It seemed to me that it would be an excellent site for a beautiful, enlarged, modern bus depô t. However, I must accept that perhaps that was too ambitious. I was prepared to waive that. Nevertheless, this is still a query in my mind. The cost might be prohibitive but there is behind the Surrey Tavern, nor far away, an ideal site for a much better bus depô t which would release this other land for housing that is so desperately needed.
The next question was whether it was essential to pull these houses down. Clearly if the bus depô t is enlarged on its present site, it is essential to provide access by pulling down the six houses in Natal Road. However, I do not believe that it is necessary to pull down the three houses in Ellora Road which run at right angles to Natal Road. I say this because the objective of pulling down these three houses is to provide access to a proposed underground car park for staff.
That car park will be built on the site of an existing car park which has excellent access from Streatham High Road. It is regularly used by those who wish to go to the cinema or the ice skating rink. When I pointed this out to the London Transport Executive it said, "Well, it is quite possible that this would provide access. Unfortunately, the Bill does not empower us to a right of way because that access is owned by Mecca".
The Executive has given me the assurance that it will use its best endeavours with Mecca to provide that access. My


point is that if such provision had been made it would not have been necessary to include these three houses in Ellora Road. There is a considerable query in my mind about the drafting of the Bill with regard to the access to the car park and the necessity of pulling these three houses down.
The next question was whether my constituents were receiving fair compensation. I have been given in confidence the details of this compensation. I am no judge, but it seems that it is reasonably fair and it has been accepted more or less, with reluctance, by all but one of the households involved. Those who have not accepted simply do not, I understand, wish to move house—a motivation with which I sympathise deeply. The compensation being offered seems to be substantially better than the sums for which London Transport purchased the two houses it already owns. This gives some slight cause for disquiet about the price it paid for the other two houses. Presumably that is past and done with. It seems, on the issue of compensation, in line with the legislation which governs this, that my constituents, if they have to move, will at least be able to buy a comparable house.
In short, I have two queries left in my mind. One concerns the siting of the garage and the other relates to the question of the access to the underground car park and the three houses in Ellora Road. I very much hope that when this Bill goes into Committee, should the House give it a Second Reading, these aspects will be examined in detail. Given the overall improvement to London and London Transport which it brings, I would not wish to divide the House.

7.23 p.m.

The Under-Secretary of State for the Environment (Mr. Neil Carmichael): As is usual in debates of this kind, a Government speaker intervenes only briefly to give the House an indication of the Government's attitude to the Bill. I take much the same attitude as the hon. Member for Streatham (Mr. Shelton). We have no objections to the proposals.
My hon. Friend the Member for Enfield, North (Mr. Davies) has indicated the powers sought by London Transport Executive for the continuing efficiency of its operations. The Bill is

aimed at an overall improvement of services and meeting the convenience of the travelling public. I therefore recommend that the Bill be given a Second Reading so that it may go to a Committee, where the experts who know the subject intimately can be cross-examined, before we take a final decision.

7.25 p.m.

Mr. John Page: We can be grateful for the interesting and elegant way in which the hon. Member for Enfield, North (Mr. Davies) introduced this Bill, which seems to have many useful aspects. On a previous occasion I had to declare an interest, having very nearly been born on a No. 12 bus. I have a particular personal interest in paragraph 6 of the statement, because when I did arrive, more or less in the hall of my home, it was exactly above the underground railway. I feel that I have, again, a particular personal interest.
I am glad that the easements will not demand a greater encroachment upwards than nine metres above the subsoil. This is because the shaking of the house resulted in the better health of myself and my family since the nursery window fell wide open every time an underground train went by.
On a serious note, this is the first occasion since the Moorgate tragedy on which London Transport has been discussed I n the House. It is important to say, as a London Member, that London Transport has the finest safety record of any public service in the world. It is a fantastic record. I am happy to say that my constituents do not seem to have lost their confidence in the service provided since the Moorgate accident.
I am sure that London Transport will look into the results of the various inquiries going on into the Moorgate tragedy and particularly whether the existence of a blind tunnel could have had any bearing upon it. I noticed that the reorganisation of Moorgate is mentioned in one of these paragraphs. The greatest hazard to the Underground traveller is overcrowding on trains and platforms. Overcrowding on platforms I s nearly always due to the cancellation of consecutive trains on a certain route going to a particular destination. Hon. Members will know of the occasions on which two or possibly three consecutive


trains have been cancelled. They will know of the ghastly and dangerous overcrowding on platforms, with acute physical discomfort and the possible danger, as a result of the overcrowded coaches, to those who are not extremely fit. I hope that London Transport will use the new facilities which may be provided under the Bill to see whether action can be taken to avoid this situation by some forward planning. This can be done both medium term and short term.
In the medium term it can be done by trying to reorganise operating staff. in the short term, when there is an emergency and someone does not turn up for work, people could be informed further down the line that the train will be late or has been cancelled. If this warning could be given five or six minutes ahead it would ease the overcrowding problem.
I also hope that experiments will be conducted into how improvements can be made in the way in which information is given to London Transport travellers. Cancellations are often notified on blackboards, even at larger stations such as Baker Street. When travelling from one station to another, one notices that the blackboards give contradictory information. I know that messages are telephoned through at the last minute and that the station staff have to alter the information on the blackboard, but perhaps greater use could be made of electronic devices, although they are expensive, and loud hailers.
Many London Transport passengers dread the moment when the train stops at the platform and the announcement is made "All change". An immense improvement in public relations could be achieved if the reason were given for the "All change" announcement. Perhaps there is a hold-up on the line ahead, or, as happened to me recently. perhaps something is wrong with the door-closing gear. Any helpful. friendly information that can be given by the station staff to explain the inconvencience that is caused to passengers would be much appreciated.
Paragraph 11 of the statement refers to the new Heathrow Airport station. That may be used by many travellers coming into London from the West. I read that a charge would be made for anyone entering the Heathrow area. It would

seem reasonable that ordinary London Transport passengers who use the station should not have to pay the Heathrow Airport dues, and I assume that London Transport will wish as many non-airport passengers as possible to travel on the line. I suspect that those travellers will have to pay a gigantic charge to park their cars, but at least they should not also have to pay the Heathrow Airport dues.
We in Harrow are proud to have almost within our borders the Northwick Park Hospital, which is probably the finest modern hospital in Britain, I f not in the world. It is pleasantly situated in open ground with views to playing fields on three sides. Because of that, it is a little distance from the main centres of population. My Harrow colleagues and I visited the former chairman of London Transport to ask whether something could be done to improve the entrance to the hospital area for buses. Four proposals have been made and on each occasion we have been met by firm opposition.
The main objection appears to be that the service, which would come from the station and other parts of Harrow into the hospital and round the grounds, is not of sufficient length to justify the minimum fare rate, and it would be against the regulations for such a service to be provided. That is hard on the people who would like to have a service and would be willing to pay for it. I would much rather pay the minimum fare than walk 250 yards in the rain, and I am sure that many of my constituents and many Harrow residents would prefer to do that. The hospital is willing to co-operate by providing bays to the buses entering and leaving. Such a service would be particularly useful for people who have to attend the out-patients' department and people who are accompanied by young children.
With those few remarks, I support the Second Reading of the Bill.

7.35 p.m.

Mr. Nigel Spearing: The whole House will wish to join the hon. Member for Harrow, West (Mr. Page) in his remarks about the safety record of London Transport. Our last debate on London Transport was on the day before the Moorgate disaster. In view of what has been said recently, there


seems to be a prima facie case for considering the dates of inquiries. I was interested in the hon. Gentleman's detailed points, which reflected some degree of public dissatisfaction with the attitude sometimes shown by the management at 55 Broadway.
I commend to the hon. Gentleman, all hon. Members and the public, the London Transport Passengers Committee, which was set up under statute by the Greater London Council. The headquarters of that committee are at Guildhall, in Parliament Square. Any member of the committee would be glad to take up matters of the kind raised by the hon. Gentleman. The committee's statutory existence began without the teeth that some of us would like it to have, but its job is to look at these matters and to obtain London Transport's view on them.
In the last debate I had the privilege of introducing the London Transport (Additional Powers) Bill, which was concerned with the construction of buses and the sale of spare parts. The Bill received a Third Reading earlier today. That debate was marked by my laudatory comments on London Transport, but this evening I shall introduce a note of controversy. Before I came to the House, and since I have been here, I have had considerable concern, I hope constructive, with London Transport. I shall draw to the attention of the House one or two matters contained in the Bill which need to be watched.
First, there is the relationship between Parliament, the GLC and London transport. Until recently London Transport was responsible to the Minister and, through him, to the House. In the reorganisation of the late 1960s London Transport became the responsibility of the GLC. Parliament is being asked to give permission for the works mentioned in the Bill and I do not complain of that. It is clearly right that the Bill should come to the House because it concerns new works which are part of the railway structure and that is historically how such matters have been dealt with. I understand that the GLC is not entirely aware of some of the Bill's proposals. There is cause for doubt about expenditure.
One project alone—the extension to the Bond Street booking hall—will cost

nearly £7 million. The Secretary of State for the Environment has authorised a grant under Section 56 of the Transport Act 1968 of 63 per cent. of the net capital cost. The House, by the Bill, is presumably authorising £3½ million for that work. I do not say that the Fleet Line was not necessary, but central London's underground traffic is declining. There is already a small booking hall at Bond Street, and to spend £3½ million on its enlargement, albeit for the Fleet Line, seems a lot of money.
I draw particular attention to the subway which is being built to connect the Piccadilly Line platforms at King's Cross tube station with the rather small and little-used platforms on what is known as the Widened Lines station. This is in the constituency of my hon. Friend the the Member for Islington, South and Finsbury (Mr. Cunningham), with whom I have discussed the matter. Those who follow railway matters in London will be mystified by the proposed connecting subway. As many people know, many of the trains going through the Widened Lines station will shortly be diverted to Moorgate. The need for this subway would appear to be reduced. Certainly there will be one or two trains a day in each direction direct from the London-Midland line to Moorgate over the existing route. It would appear to be a rather strange project, particularly as £5·1 million is involved. That is a lot of money on any basis.
The House should scrutinise requests for expenditure of that sort. I have made inquiries and it appears that London Transport believes—not without some reason—that although the number of trains using the King's Cross Widened Lines station will be reduced in the near future, it is likely that in the not too distant future more trains will use the station because of the projected extension of the London Midland electrification proposal from St. Pancras through the Snow Hill tunnel into Blackfriars and over the Southern Region lines. That is an admirable scheme.
I do not think that anyone who follows railway affairs in London would question the claim that it is a good scheme. The Barran Report, which has already been debated in the House by the hon. Member for Ealing, Acton (Sir G. Young) and myself, puts forward that scheme as one


of its "Cross-rail" options. Of course, the report is still in the discussion stage. The GLC has asked for comments and there is a lot of thinking and a lot of discussion to be done. I would support that as one of the Cross-rail options. A new tunnel of half a mile coupled with the Watford-Euston electrified line would offer a proper through-running system. That would be a good use of money, and it might not cost as much as £51 million.
Until the discussions have been concluded and some recommendation has been made it is strange, to say the least, that London Transport should put forward such a proposal. The sum involved does not appear in the Bill or the Financial Memorandum. I discovered the nature of the sum by perusing some documents in the Private Bill Office, and London Transport has kindly confirmed the sum involved. I draw this matter to the attention of the House, and to the GLC and the London public, because it is no secret that relationships between the GLC and London Transport are still in a formative stage. I am sure that they will continue to improve, but this is one example of where we may get ourselves into some slight statutory muddle, to say the least.
Another matter raised by the possible through line from the London Midland main line north of London into the Southern Region is the relationship between British Rail and London Transport. It has not been an easy matter. Any extension of tube lines, wherever it may be, provides a popular game for railway afficionados. Any change means a loss or gain of revenue by one or other of those organisations.
One of the matters with which the Barran Report did not deal adequately was how we should deal with such an extension. I would not blame London Transport or British Rail for being obstructive, although such an attitude has not been apparent. Of course, they have their own interests to defend. It is a matter for politicians either on this side of the river or on the other to see that difficulties do not arise. However, they have arisen ever since the days of Lord Ashfield and the originator of the Southern electrified system—the great Sir Herbert Walker. The difficulties continue and they are

understandable because a clash of interests always takes place.
The £5·1 million for a subway, even if it is necessary, between several lines at King's Cross raises all the matters which have not yet been resolved. I hope that the Barran Committee recommendation for a liaison committee on which the public interest can be represented will be able to consider such programmes.
I now turn to another financial aspect or implication of this matter, namely the question of who pays. We have seen that the Department of the Environment is providing a substantial amount of the money, but all those who use London Transport railways know that there has been a considerable increase in fares only very recently. The proportion of London Transport money which goes into the repayment of loans is creeping up again. That is the position after the previous Labour administration wiped the slate clean prior to 1970. We are now involved in greater loan sanctions for capital expenditure. It is capital expediture with which the Bill is concerned, some items of which are a little long term, if not entirely unnecessary.

Mr. John Page: I am grateful to the hon. Gentleman for giving way, especially as I wish to introduce a party political note into what has been a non-party political debate. It would be fair to say that when the Conservative GLC was in power there was no deficit on the London Transport services. It is only since the new Labour-controlled GLC started to subsidise fares that the terrible financial troubles have become so overwhelming. That has happened in a matter of two or three years.

Mr. Spearing: I shall not take up the hon. Gentleman's intervention, because I had hoped that we would avoid the very obvious and well-known differences between us on this issue. I would have thought—whichever side of the political fence we stand on these matters—that only by examining the sort of points that I am trying to put forward are we likely to get London Transport to run a little better. One of the difficulties to avoid is that of arguing about matters that divert us from the immediate issues of the day. We must get down to some of the fundamentals. Therefore, I shall not follow the hon. Gentleman down the road that he has taken.
I was talking about fares. Anyone who has a family and who does not have a car, or who does not use one for certain journeys, will know that the present London Transport rail fares for family travel are not only regressive but highly expensive. They provide almost an experience in themselves. It is necessary to rake out a £1 note or more at the ticket office for a journey across London. Personally, I am sorry that we could not have had a better look at the way in which we pay for railway fares in London. It is a complex subject. Over a year ago I made certain inquiries of London Transport concerning the market for rail transport in London. I have not yet received full replies. I would have thought that London's transport organisation, with its considerable commercial and technical staff, would be able to give me some better replies than it has so far succeeded in offering.
I am not saying that we have not had discussions. I have had some friendly discussions with some friendly officials, but friendly discussions are not enough. I am sorry that, so far, the inquiries that I made over a year ago have not had the full replies which I expected. I am not saying that we could have avoided certain problems had I received those replies, but I am saying that I have a prima facie case for suggesting that London Transport is not as fully aware of the potential market for bulk travel in London as one might have expected. Indeed, the time that that body takes to reply to these inquiries proves that point.
On this occasion London Transport—or the GLC—has put up fares. I make no complaint about the increase, as such, but it has also cut some of the services compared with the situation several years ago. One would think that on the Piccadilly Line there would be trains every few minutes. However, on the time table between North Ealing and Rayners Lane, the intervals between trains are as great as 20 minutes in weekday off-peak periods. The intervals are of 10–20–10–20 minutes. It is hard luck for those who just miss the 20-minute connection. That is the timetable interval, which takes no account of cancellations or late running where delays are often experienced.
I do not know whether London Transport believes that it is good enough for tube trains to run at only 20-minute

intervals. The same can be said of the District Line on a Saturday, on the Richmond branch. I have no constituency interest, but I have an interest in the reputation of London Transport. Somebody who has to wait on a cold, open station for up to 20 minutes will take the view, "Once bitten, twice shy". Surely in face of the increase in fares and the relatively small cost of an extra train or two on various lines, those intervals could be reduced. It confirms my feeling that London Transport is not sufficiently geared to meet the needs of passengers as passengers see those needs—which is a quite different matter from the situation thrown up by statistics.
The other point which I should like to emphasise in respect of the considerable capital expenditure outlined in the Bill relates to the fact that the number of Underground journeys in central London areas has declined. The total passenger mileage has been maintained, and is slightly up, as one might have expected with the opening of the Victoria Line, with more journeys being made by passengers. However, we read in the Barran Report that since 1967 in central London the actual passenger traffic has declined by 11 per cent. which is a considerable drop. I am not saying that peak hour traffic has declined by that amount, but that the overall decline has reached 11 per cent. in that area.
On the East London line the traffic has declined by 40 per cent. in five years—in other words, by nearly half. I suppose that by the end of next year it will have declined by 50 per cent. This is not surprising when we remember what has been happening in East London. On the Hammersmith and City Line there has been a drop of 40 per cent. in traffic over a period of 10 years. The report shows that since 1967 traffic at the Westminster Station, for example, has declined by between 25 and 50 per cent. Indeed. with few exceptions, traffic at all stations in the London area east of the Victoria Line has declined in the last few years. Yet in this Bill we are being asked to authorise considerable amounts of capital expenditure. I am not saying that we should not support such expenditure; indeed, I believe that we should fully support any extension of rail facilities in London, but I plead with hon. Members to make sure that we get good value


for money. Even if the Underground gets a better ventilation system, and all the rest of it, we still want to see people travelling reasonably freely and at reasonable charges.
I close by emphasising the point that we are still not entirely sure about the total needs of London for rail transport as a whole. If we take a proper look at the situation, I believe that we shall come to the conclusion that in a system which embraces over 500 stations and whose services cover off-peak times and weekends, we must ensure that the system makes a larger contribution to the solution of movement problems in the London area than is the case at present. These continuous conveyor belts which have to exist for work purposes can be used in a way which will allow recreational journeys, optional journeys and journeys for old-age pensioners in ways which will provide better social forms of movement than the present system provides.
I am afraid that before the publication of the Barran Report, which is not as comprehensive as it might have been, these matters had not been examined. I hope that as a result of some of the things which have been canvassed in this debate these questions will be followed up. However. I believe that the tone and content of the Bill do not point in the right direction since it appears that we are being asked to authorise large sums for vague purposes.

7.56 p.m.

Sir George Young: It is a pleasure to be called to speak in this debate following the remarks of the hon. Member for Newham, South (Mr. Spearing), who was my predecessor as Member of Parliament for Acton. His interest in London Transport matters is well remembered in the constituency. It is a matter of personal regret to me that in four years there he did not solve all the problems involving London Transport which affect my constituents.
I did not agree with everything the hon. Gentleman said, and I should like to pick up one or two of his arguments. He claimed credit for action taken by a previous Labour Government in wiping the slate clean in respect of London Transport's capital debt. That is true, but that was not the Government's

original intention. That action was taken only after vigorous protest by Sir Desmond Plummer, as the then leader of the Greater London Council. The right hon. Member for Blackburn (Mrs. Castle), as the Minister of Transport of the day, eventually agreed to write off the debt.
The hon. Member for Enfield, North (Mr. Davies) introduced the Bill with his customary clarity and good humour. I know that he will not take it amiss if I, as one of his football colleagues, make some criticisms of the Bill and, by implication, of London Transport, whose affairs are usually shielded from the gaze of this House by County Hall.
In Clause 5 London Transport seeks powers to enlarge the ticket halls at Baker Street and Bond Street stations and to build a new ticket hall at King's Cross. The cost of these schemes appears to be about £13 million.
I have a minor criticism of the proposals for Bond Street, the expenditure on which is to be £6,980,000. Londoners might have hoped that for such a colossal sum a public convenience would have been included in the specifications at this significant and busy interchange—but no. Nor can London Transport defend this omission by saying that alternative facilities exist nearby, for they do not. The latest report of the London Transport Pasengers' Committee criticises this shortcoming. It is regrettable that a possible clash of opinion between London Transport and the borough council as to who should pay for this facility should have resulted in Londoners and visitors being deprived of their public convenience. However, that is but a passing criticism, if that is the right expression in this context.
Under Clause 5, I wish to deal with some broader issues raised by the expenditure of £13 million on ticket halls. At the time of the last GLC election, many Londoners were led to believe that a Labour-controlled council would introduce a fares-free transport policy. Many of us suspected that this was just election propaganda, to be abandoned as soon as convenient. We may, I hope, assume that even the GLC would not spend £13 million on new and bigger ticket halls if it were about to abolish tickets. But the proposed expansion of these halls raises the question of the progress that London
Transport is making towards automatic fare collection. This is relevant to this clause because the system London Transport wishes to introduce needs structural alterations to the ticket halls, and the proposals before us reflect the needs of this new system.
Perhaps I can begin by giving some background information. Automatic fare collection was first introduced on a large scale on London Transport at Victoria Line stations, when the new line was opened in 1968. Although London Transport had the benefit of about 100 years of selling and collecting tickets, the system which it devised for the Victoria Line in the light of this experience proved a failure, and was quietly dropped after only three years.
I quote from a paper prepared by the GLC officers of the GLC Transport Committee headed "TP 77". It reads:
An internal London Transport review of the Victoria Line system (inwards and outwards automatic gates with parallel manned barriers) established that there was scope for a more cost effective approach.
Those of us who can interpret the language of GLC officers will realise that the last sentence is a polite way of saying that significant sums of money have most regrettably been wasted.
The Victoria Line system was abandoned because there was no possibility of reducing staff or fraud, since manned barriers were needed in addition to the automatic ones for those passengers with tickets issued by British Rail. Instead, a new system of automatic fare collection was devised.
Londoners are obliged to London Transport for adding a new dimension to the meaning of the word "automatic". The new automatic system will require an additional 350 staff to operate it, over and above the staff needed to operate the current non-automatic system. Far from cutting down staff costs, the new automatic system will add over £1 million per annum to London Transport's wage costs.
Those proposals must bring tears of frustration to the eyes of every Londoner and will probably provoke several pungent articles from Bernard Levin. Having abandoned one system because there was no possibility of saving staff. London Transport chose instead a system which increased staff. We might have

hoped that the custodians of the ratepayers at County Hall would spot that something was going wrong. However, that aspect warrants one short sentence in the GLC agenda for 23rd July 1974. It reads:
With the current severe staff shortages we are concerned that it has not been possible to achieve some savings on staff.
It is fantastic that London Transport will spend £8 million on automatic ticket-issuing equipment and automatic barrier-control equipment. In spite of that it will have to recruit an additional 350 ladies with dyed blonde hair, headscarves and cigarettes to monitor the automatic fare collection system.
The justification for this new system, which is based on automatic entry gates, is the elimination or reduction of fraud. However, the GLC said that there was very limited direct evidence as to the effectiveness of system C in increasing revenue.
Clause 5 of the Bill conceals a sorry story. A new and expensive system was installed on the Victoria Line. That was abandoned, for reasons which should have been apparent from the word "go". The automatic exit gates at the Victoria Line stations and elsewhere are redundant. The reading and encoding equipment is a write-off.
A new system is to be introduced, with the same major disadvantages as the old one. In the long run yet another system may have to be introduced when London Transport and British Rail eventually agree on a fully automatic and integrated ticketing and revenue-control system for the whole London commuter system. In spite of this manifest incompetence and extravagance there has been scarcely a murmur of protest.

Mr. John Page: If it were not for the involvement of British Rail tickets, would the service work? If not, should we think of some other way of dealing with this problem?

Sir G. Young: The complications are not solely those posed by British Rail tickets. There are also problems associated with season tickets issued by London Transport, and other tickets of short duration or on special offer. The problem is more complicated.
As regards tickets, although the GLC gave its approval to the latest round of


fare increases on 21st November 1974, which came into effect four months later, on 23rd March 1975, there are now not enough new tickets. Travellers must buy tickets at the old rate and pay the difference at their destination. The reason is that the GLC took so long to increase the fares that the people who supply London Transport with the plates used to print the tickets in ticket offices went out of business in the meantime. When London Transport wanted to replate, to cope with the new fares, there was nobody to supply the plates.
Under Clause 12 power is sought to provide road transport garages and depots at Hammersmith, Norbiton, Norwood and Streatham. The clause refers to the associated facilities to be provided on those locations. I hope that provision will be made for the substantial recruitment of women bus drivers and Underground drivers.
Introducing this clause, the hon. Member for Enfield, North spoke of the need to accommodate larger buses. I hope that there is also the recognition of the need to accommodate smaller drivers.
In the recent debate on the Second Reading of the Sex Discrimination Bill, the hon. Member for Wood Green (Mrs. Butler) said:
I then heard from a London bus conductress who had been refused training as a bus inspector because she had never been a bus driver, and indeed could not be a bus driver because her male colleagues opposed it"—[Official Report,] 26th March 1975; Vol. 889, c. 583.]
There is no law against women driving Underground trains or acting as guards. However, none of them do so. Although the unions preach equality for women in all jobs, there is a big gap between what they preach and what they practise. If women are allowed to drive buses, why on earth cannot they drive trains or act as guards? The level of physical exertion is infinitely less. I can think of no justifiable reason for excluding them from that type of work.
It is a matter of regret that after the battle to get women accepted as bus drivers was fought and won there are now only six of them. This is disappointing, since my latest figures show that London Transport is 15 per cent. short of drivers.
I fear that there is considerable hostility to the employment of women as London Transport bus drivers. In view of the staff shortages, I do not think that London Transport can afford that. Therefore, I hope that the associated facilities referred to in Clause 12 envisage a large recruitment of women.
In view of the uncharitable comments sometimes made about lady drivers, I was interested to read the following passage in the edition of London Transport News, dated 4th April. It reads:
Kingston Garage snooker teams have had a season of near misses.
I turn finally to Clause 21, which relates to land acquired by London Transport. Mention was made of the blight associated with land owned by London Transport. I should like to raise a constituency problem relating to such land owned by London Transport at Deena Close, which is near North Ealing station. That land is used as allotments. It fulfils a useful purpose, in view of the shortage of allotment land there. During the past few years London Transport has put forward proposals which have caused great local anxiety. The site in question is locked in. Access can be achieved only by going through a quiet residential cul-de-sac or by constructing a road which would emerge at a blind spot in a fairly busy road to the north of the site. There seems to be a lack of understanding and liaison between London Transport and the local residents. Some confusion has been caused by the frequency with which London Transport has changed its plans. I wonder whether, in instances where London Transport does not need land for pressing operational purposes and is not using it for its own staff housing, there is a case for transferring the ownership of the land either to the local council or to local residents' associations, to resolve any conflict.
I hope that the Minister who replies will deal with the point concerning automatic fare collection, since the large sum of £11 million is involved. In the light of what the Chancellor told us earlier, it is clear that we do not have a lot of money to throw around. A scheme which has benefits which can only be described as somewhat doubtful should, perhaps, be examined slightly more closely than appears to have been the case to date.

8.9 p.m.

Mr. Anthony Berry: Both my hon. Friend the Member for Harrow, West (Mr. Page) and the hon. Member for Newham, South (Mr. Spearing) referred to the terrible tragedy which took place only a few hours after our last debate on London Transport. I was one of a number of hon. Members some of whose constituents were injured or killed in that disaster. Such a disaster affects us all. The tragedy was almost made worse by the fact that it disturbed what until then had been London Transport's remarkable safety record. We all hope and believe that that safety record will be regained. The fact that people are again using the Underground in the same way confirms their confidence in the system.
We are grateful, once again, to the hon. Member for Enfield, North (Mr. Davies) for introducing the Bill, especially as I am sure that, as I did—since we represent the same London borough—he went through it line by line and failed to find any mention of Enfield.
I do not intend to prolong this discussion. A number of my hon. Friends have made important constituency points which should be looked at in Committee. My hon. Friend the Member for Streatham (Mr. Shelton) made some important points. My hon. Friend the Member for Harrow, West once again, in his usual jovial way, described to us his early life—and no debate about London Transport would be complete without that. Each time my hon. Friend alters it slightly, but it is always enjoyable to listen to him.
The hon. Member for Newham, South takes a great interest in transport debates affecting London, and we listened to him with interest. However, I do not share his enthusiasm for the fact that the Third Reading of the other Bill took place earlier in the day. He will understand why. However, he made some pertinent points and, on today of all days, he was right to draw attention to these costs involved at Bond Street, and so on.
I was also interested in the hon. Gentleman's comments about the decline in traffic. But other changes are occurring. The hon. Member referred to the Piccadilly Line, which runs to my constituency. Even if the overall figures are

falling, we find that at the end of the line, in the Cockfosters and Oakwood areas, more and more commuters are leaving their cars in residential streets around the stations. There is no proper parking accommodation for cars, and the result is that it is causing an ever-increasing nuisance to local residents. I saw some figures only this morning which show that in the past two years the number had increased by about 65 per cent. Something must be done about it. It may be that in some future Bill we shall be asked to authorise the payment of money for additional car parks. If we are, it will be in a good cause.
Mention was made of Heathrow. It may be that the hon. Member for Enfield, North was asked more than he could answer about the timing of the Heathrow link. However, we shall have opportunities to question the Minister about that on another occasion. We hear that the link may be delayed, and there is the other rumour about the possibility of a toll for cars going to Heathrow. We can go into that at another time, too.
My hon. Friend the Member for Ealing, Acton (Sir G. Young) gave us a delightful account of his earlier experiences and made some interesting comments on the problems of the Underground. I was reminded of an official visit, two years ago, to Hungary, which I made with my right hon. Friend the Member for Worcester (Mr. Walker). We were taken on Budapest's Underground, which is a very fine system. It was a Saturday afternoon. We were taken along the line for three or four stations, travelling in the front coach, which had been reserved for us. We got off at one station and were shown the workings of it. Then we went back to the platform. When the next train came in. again the front coach was empty, and we got in. I thought to myself that that was a piece of extremely good timing. Then I realised that every train that afternoon had its front coach kept empty for us. In London, in the middle of the football season on a Saturday afternoon, that would not be very popular, but things are different there.
This has been a short but useful debate. The Bill will improve conditions for both those who work for London Transport and those who use it. For those very good reasons, I am happy to welcome the Bill.

Mr. Bryan Davies: With the leave of the House, perhaps I may make a few comments in reply to what has been a most informed and interesting debate. We may not have aroused the passions in which we shall indulge over the coming days in the Budget debate, but we have had an opportunity to engage in an informed discussion about certain aspects of this Bill and to comment more widely on the services offered by London Transport.
Incidentally, I assure hon. Members that any points which I fail to deal with will be carefully scrutinised by the promoters of the Bill and replies will be sent to hon. Members on the detailed matters that they have raised. Some of them are possibly matters better dealt with in Committee than by a reply to this Second Reading debate.
I want first to congratulate the zealous defence of the interests of his constituents presented by the hon. Member for Streatham (Mr. Shelton). I am not sure that he should be encouraged to oppose Bills of this nature, but on this occasion he presented in an extremely able manner the issues raised by the construction of the extension to the garage in his constituency. London Transport has been in correspondence with him about these matters, and it has engaged in extensive negotiations with the individuals concerned.
As for the three houses in Ellora Road, to which the hon. Gentleman made specific reference, it is hoped that access to the garage will be possible with the demolition of only one house. At present, two of these three occupants have accepted the terms offered by London Transport, and negotiations are continuing with the remaining owner-occupier.
I have heard previously some mention of the Surrey Tavern site. London Transport has looked closely at this suggestion. The problem seems to revolve around the availability of road access to the site. It is in a very busy area. What is more, I think that it must be recognised that the proposition in the Bill to extend the existing garage is made on the basis of an informed judgment that the Surrey Tavern site is not entirely suitable in the way that the hon. Member for Streatham suggested.
The hon. Member for Harrow. West (Mr. Page) expressed a number of sentiments which we all applaud. He spoke first about the safety record of London Transport. In some respects, the Moor-gate disaster engendered a great sense of shock because Londoners take London Transport so much for granted in terms of its safety record. especially the Tube.
I sympathise with the point made by the hon. Gentleman about the overcrowding danger. We have seen from time to time the necessity for measures to be taken to safeguard people against this difficulty.
I also support the hon. Gentleman's representations about the need to communicate as much information as possible to passengers. We recognise that the problems of cancellations on the London Transport system are not so significant as those on British Rail in terms of inconvenience to passengers. Nevertheless, communications are enormously important in ensuring good relations with the travelling public.
As for the airport link, the completion date for the construction of this concourse, reflected in Clause 22, is mid-1977. I am unable at this stage to answer the question about the possibility of an airport fee. London Transport will, I am sure, write to the hon. Gentleman and assure him about it.
As always, my hon. Friend the Member for Newham, South (Mr. Spearing) made an extremely informed and precise contribution to the debate. I recognise the importance of what he said about the scrutiny of costs. However, he will recognise as regards Bond Street station that here we have the refurbishing of a very old station. What is more, it has the misfortune to be located in one of the most expensive parts of London. Inevitably a substantial part of the cost involved relates to the value of the property on the site.
My hon. Friend also referred to the general strategy. I have no wish to engage in debate on the strategy of London Transport and its rail system in general. I could not hope to vie with my hon. Friend in terms of his expertise in these matters. My comments about the rail system were concerned with grubbing


away under the ground, whereas I suspect that my hon. Friend was more concerned with rails which pierce the clear air of London on the suburban rail services.
My hon. Friend contested the need for a subway to the Widened Lines station at King's Cross. This is a reflection of anticipated passenger demand. The facility will provide for direct commuter traffic by surface rail from the Bedford area on the suburban line direct to Moorgate. It cannot be contended that this may be an over-provision of facilities in terms of the demands of passengers.
The hon. Member for Ealing, Acton raised a number of extremely important points. I am not sure that all of them are raised by the Bill. However, the question of automatic ticket collection needs an airing in this House and greater consideration should be given to it by the authorities involved. It is right that the hon. Member should have raised this very significant point.
I wish to be associated with the hon. Member's remarks about the necessity for ensuring that the promotion prospects for women employees of London Transport are equal to those of men. I am sure that some of the discrimination which he contends existed in the past—which is an extremely valid point—is unlikely to be sustainable within the framework of parliamentary legislation introduced recently. London Transport is not the only employer in the country which will have to look rather carefully at past practices to ensure that remedies are provided on the basis of this new legislation.
I did not have the opportunity in a previous debate to congratulate the hon. Member for Southgate (Mr. Berry) on speaking from the Opposition Front Bench. I take that opportunity now. The problem of car parking facilities in outer London is extremely important. It is possible that that point balances the worries expressed by my hon. Friend that the cost of London Transport stations must not be excessive. The extension of car parking facilities at stations in outer London would possibly occasion much greater expense. Nevertheless the point is well taken that ordinary householders should not be put to the enormous inconvenience of having cars parked outside their houses all day.
This Bill is unlikely to throw our constituents into transports of delight. It provides some real and necessary facilities for London Transport to extend its capacity for running an adequate transport system for the capital. All hon. Members who have spoken, with the exception of my hon. Friend the Minister, represent London constituencies. We judge the Bill by the services it will make it possible to render to our constituents.
Inevitably, however, London Transport provides an enormously significant service to the many home and overseas visitors to the capital. Overseas visitors will form an impression of the capital which will be based partially on the ease with which they can travel around the various points of interest. In that context it is very important that we provide a transport system which is as efficient as possible, within cost limits, in the capital.
I thank the House for its indulgence and for giving me the opportunity to address it for the second time in this debate. All the points, which have been raised with precision, can be considered adequately in Committee. On that basis I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time and committed.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thomas Cox.]

RAIL SERVICES (NORTH OF SCOTLAND)

8.24 p.m.

Mr. Hamish Gray: It is perhaps fortunate that following a debate on transport in London I should have the opportunity of raising the question of transport at the other end of the land. I have great pleasure initiating this debate on the question of rail services in the North of Scotland.
The early years of this century saw the railways in Britain at their peak, but the subsequent development of other forms of transport had a major impact on this


situation. After the rationalisation programme of the 1960s, many of the uneconomic lines were closed, and at that time the North of Scotland accepted its share of the economies under the axe of Dr. Beeching.
Mercifully, the industrial development in the region played a considerable part in causing successive Governments to postpone further closures, and only last year the present Government gave a welcome reprieve to the scenically magnificent line from Dingwall to Kyle of Lochalsh in the constituency of Ross and Cromarty. This line, in addition to its tourist attraction, is now playing a significant part in oil-related projects in the West. With the threat also removed from the main line from Inverness to Wick and Thursoe, the Highlands at least can now look forward to a permanent service.
There must, however, be no question of a curtailed service on the line from Perth to Inverness. Rumours that this route was to have had its traffic diverted via Aberdeen can only be hoped to be without any foundation, for such a move would be wholly unacceptable to those who live and work in the North.
The efforts of the many people who have campaigned over the last decade for the retention of adequate rail services in the area have been justly rewarded. I should like to pay tribute to those who, both within the House and outwith the House, assisted in this task. The hon. Member for Inverness (Mr. Johnston) and the hon. Member for Western Isles (Mr. Stewart) both played a considerable part in the campaign which we fought. But I do not think that it would have had the success which it achieved had it not been for Mr. Torquil Nicholson, who is the local councillor for the Kyle area and now the regional councillor in the new authority. Regrettably, however, there now remains a host of essential improvements if the railways in the North of Scotland are to maintain their rejuvenation.
I was prompted to raise this matter tonight for two reasons: first, because of the ever-increasing number of complaints which I receive from my constituents regarding the quality of the service provided, and secondly, because of the necessity for attention to be focused on the need for planned future investment in the railway system in the North.
I deal first with the complaints. These refer to a variety of failings, but far and away the most common is the complaint about the late arrival of trains from further south. All too often no obvious reason is given to the travelling public. I cannot help feeling that in this day and age it would not be too much to expect that British Railways could devise some method of communicating with those who are actually travelling on trains and advising them of the reason for delays. There are few things which can be more frustrating than sitting in a train at a station wondering why on earth it is not proceeding on its journey.
The Glasgow and Edinburgh to Inverness service is particularly bad in this respect. A local government official recently travelled to Inverness from Glasgow. I shall read from a letter which he wrote to me:
On Tuesday 8th April I left Glasgow on the 10 past three train which, as you are probably aware, connects with the main train at Stirling. The 10 past three train made a rapid journey to Stirling and we arrived about 20 to four. The train from Edinburgh with which the Glasgow train connects was scheduled to appear at six minutes past four. At that time there was no sign of the train and an announcement came over the Tannoy system that the train would appear about half past four. Half past four came and no train. It was then announced over the Tannoy that the train was further delayed and would appear at five o'clock. As by now you will have worked out, I was standing on the Stirling station platform in the cold from 20 to four until five o'clock.
He goes on to say:
The train arrived at Pitlochry and the engine failed. The heating went off and presumably an engine was called up from Perth. Wherever it arrived from, I do not know. but eventually it did arrive and was coupled up to the train and we proceded northwards. The heating, however was not reconnected and in the new type of first class carriage one cannot control the heating as one could in the older types … 
And so it goes on.
The 13.40 train from Edinburgh is timed to arive at Inverness at 18.40 hours. There is no connecting train further north, and the bus for Dingwall leaves before the train arrives. One would think that some sort of co-operation between the British Rail authorities and the bus operators could be arranged. This is no new situation. My constituent traveling further north have had to suffer these conditions for a number of years, and one


would have thought that something could have been done about it before now.
Another constituent who uses the service regularly advised me that on three occasions recently there was no heating whatsoever, the excuse being given that the boiler was out of action or that no replacement engine was available.
These things may seem vaguely amusing when we talk about them in this Chamber, but I can assure hon. Members that when one lives in the North of Scotland, where at times it can be extremely cold, and one has to put up with conditions of this sort, one naturally becomes extremely angry and wants to see something done about them. Far too often I receive complaints about dirty and ill-kept carriages, toilets which do not work, inadequate heating and late arrivals. This happens repeatedly.
However, I must place on record that I have always received courtesy from the staff at both Inverness and Glasgow when I have complained on behalf of constituents, and I would add that Mr. D. J. Cobbett, General Manager of the Scottish Region, has gone to a great deal of trouble investigating complaints which I have raised with him.
Nevertheless, it seems to me that all too often a great many of the complaints arise from the fact that old rolling stock is used on these lines—stock which I would say is put out to grass on the north line—although I have to admit that even the Clansman, the new Inverness to London day train, has come in for its share of criticism. On 20th March, for example, it started the 600-mile journey south without any heating at all. The locomotive's indicator showed that the heating was working. Checked at Aviemore, this proved to be wrong. And so it goes on. Checked again at Perth, the train was signalled away before the electricians had time to repair it. This sort of complaint can be repeated over and over again. Why cannot these things be checked before the train starts?
In a Question recently I asked the Minister for information about investment in the Scottish Region, but I was given the answer, which rather hid behind the facts, I thought, that the figures were not available on a regional basis.
I must suggest to the Minister that the Government should perhaps forget some

of their grandiose schemes about participation in industry, which is going to cost the taxpayer hundreds, if not thousands, of millions of pounds, and spend just a fraction of this money on the modernisation of essential rail links.
No link in the country at the present moment is likely to become more important than that of the Perth to Inverness line, and particularly the section further north from Inverness to Wick and Thurso. With inadequate roads to many parts of this area, rail services have become of even greater importance. Furthermore, I should like to suggest to the Minister that he reject the present costing methods used by his Department and British Rail for determining the amount of the subsidy allocated to each line. The present method contains many anomalies and should be modified. I would also ask him to reconsider the formula for comparing road and rail subsidies. They are ridiculously biased in favour of roads.
I should like now to make some positive suggestions as to how the services in this area might be improved. First, in view of the industrial importance of the North of Scotland and the fact that a great deal of additional industry has been created by the discovery of North Sea oil, I suggest that the Government should insist on special investment in rail improvements in the area. By that I mean the whole of the main line from Perth northwards. I am not talking about a small area on a constituency basis. I am convinced that that would be beneficial and, in the long term, a sound Governmental decision on investment.
Secondly, I suggest that British Rail should be asked to prepare, in conjunction with the Scottish Transport Group, a co-ordinated schedule of services so that bus and rail transport could connect and work in the best interests of the travelling public. I feel that that does not happen at present.
The Scottish Association for Public Transport produced an interesting document in 1972. I am sure that the Minister will be aware of it. On page 10. paragraph 6.4, we read,
there is a need to reorganise certain bus services in the Northern Highlands. At present the bus network tends to exist in isolation from other transport networks. Long distance stage bus services connect with shorter distance


stage services, but rarely do buses connect with trains or ferries.
It is incredible that for such a long time these conditions should have been allowed to go unheeded. I am not blaming the present Government any more than I blamed my right hon. and hon. Friends who then sat on the Government Front Bench. There has been a disregard of the needs of the Highlands of Scotland regarding rail transport by successive Governments. Although a number of hon. Members have drawn the attention of Governments to this matter, for some unknown reason there seems to have been a lack of co-ordination between the various departments and bodies which could have done something about it. I trust that this will be put right without further delay.
Thirdly, I suggest that many of the diesels which are used on lines in the North should be replaced at the same time as the coaches. I refer not only to the lines from Inverness to the North, but from Inverness to Aberdeen. This is a well-used service which merits additional investment. I am certain that if journey times could be cut, greater use would be made of the services.
Finally, the Minister will see from the fact that a number of hon. Members from northern constituencies are present that this matter causes great concern to all who represent the area. I hope, therefore, that he will now be in a position to give us an assurance that the Government are instructing British Rail to submit proposals for long-term improvements in rail services in the North of Scotland.

8.39 p.m.

Mr. Douglas Henderson: First, the hon. Member for Ross and Cromarty (Mr. Gray) is to be congratulated on his initiative in arranging for this debate tonight. Secondly, we should express our thanks that, due to a fortunate quirk in the procedures of this House, it is possible for more than one hon. Member to speak before the Minister winds up the debate.
I should like to address myself mainly to the North-East of Scotland. The hon. Member for Ross and Cromarty has understandably dealt with the position in the Highlands and the North.
The provision of rail and transport services of all kinds in the North-East of Scotland leaves a great deal to be desired. There can be few hon. Members from Scottish constituencies who do not recall the traumatic shock of the Beeching proposals of 10 to 15 years ago which resulted in a contraction of rail services in the North of Scotland on a scale and of an intensity which perhaps had not been thought possible. Many hon. Members will no doubt feel that the Beeching proposals represented one of the most ghastly and deplorable mistakes made by any Government in their transport policy.
Against the background of the growth that is taking place in the North-East of Scotland at the present time, I must put it to the Minister that the transport services are totally inadequate to deal with the demands being made upon them. A change is taking place in the economic and industrial power of Scotland, away from the West of Scotland and towards the North and North-East, with the development of what the hon. Member for Ross and Cromarty called "North Sea oil" but which I am sure he will join with me in agreeing should really be called "Scottish oil".

Mr. Gray: indicated dissent

Mr. Henderson: The hon. Gentleman is dissenting at the moment but I am sure that in more private moments he would agree that it is Scottish oil, and I am quite sure that when we are all sitting together in a Scottish Parliament, where these things should be decided, he will be entirely in agreement with me.
The development of oil is certainly placing a tremendous strain on the whole infrastructure of the North-East of Scotland and all of us, of whatever party, who represent constituencies in that area, are extremely concerned that the Government have not awakened to the fact and have not taken enough action to make sure that that infrastructure is adequate for the changes that are taking place.
If the Minister agrees that we are seeing a change in industrial emphasis and industrial power, surely he must agree that it is high time that the Government took their finger out, and did something about getting the resources and the capability to handle it. Many people have


previously raised with British Rail the question of the rail links that exist. There is still a line from Aberdeen to Fraser-burgh which takes goods traffic only. There is strong pressure for that line to be converted, or for other services to be provided on it. so that there is passenger traffic from Aberdeen to Fraserburgh. There is also strong pressure—and the Government should take special note of this aspect—to restore the line between Maud and Peterhead to allow it to take freight and passenger traffic.
I have taken the matter up with British Rail and I must say that despite all its expressions of sympathy, we do not seem to be getting far with British Rail on this issue. In a recent letter, the agreeable Mr. Cobbett, to whom the hon. Member for Ross and Cromarty referred, said:
We have naturally been watching with the greatest interest the developments which are taking place in the North-East since the commencement of oil exploration in the area and have made every endeavour to exploit the possibilities of obtaining suitable traffic by rail.
I must put it to the Minister that if British Rail had any commercial sense whatsoever it would be doing far more than it is doing at the present time in the North-East of Scotland.
Mr. Cobbett's letter goes on to say that British Rail has suggested that a feasibility study should be carried out at the expense of local authorities in the area. If Woolworths were about to open a shop in Peterhead, that firm would not ask Aberdeen County Council to carry out a feasibility study at the expense of that county council. Surely, if British Rail have any commercial sense whatsoever, and any interest at all in viability, it ought to carry out a feasibility study on its own account—or has British Rail no confidence in the North-East of Scotland and the development of the area?
I believe that we have now a situation in which there is a great prospect for British Rail in that area if only it has the courage to grasp the opportunity. I hope that the Minister, taking into account the appalling roads in that area and particularly the death traps on the road from Peterhead to Aberdeen, will use the influence which undoubtedly he has with British Rail and will instruct British Rail to press ahead and to ensure

that a full depth study is carried out of the prospects for rail traffic, passenger and freight, in the north-east of Scotland. Let us get on with this and waste no more time.

8.45 p.m.

Mr. Russell Fairgrieve: Like the hon. Member for Aberdeenshire, East (Mr. Henderson) I am grateful to my hon. Friend the Member for Ross and Cromarty (Mr. Gray) for initiating the debate, which concerns a most important subject for the North-East of Scotland. My support for the hon. Member for Aberdeenshire, East, however, stops short of his remark about North Sea Oil. I do not know whether it is British oil, Scottish oil, or Shetland oil.
My hon. Friend the Member for Ross and Cromarty has gone into the subject of the railways in complete detail and there is no need to go over again the most important points that he raised. Railways are becoming increasingly important, and it is easy to see why when one considers the disadvantages of travel by air and by road. With air travel there is a delay at each end of the journey and travel by car is becoming increasingly expensive, not less so after today's Budget. The railways are the one form of travel which can beat weather conditions, and that is of considerable importance in the North-East of Scotland.
Why is it always thought that only London should be the area with commuter services? Let us consider what an inventive approach would achieve. Take the example of my constituency of West Aberdeenshire which contains, apart from a large rural area, an urban belt around the city. From Dyce the railway passes through Bucksburn, Kittybrewster, the city of Aberdeen, and the line did go on through Cults, Bieldside, Milltimber, and Culter. The area has a population of over a quarter of a million, but surely there would be great saving if there were a fast single-line service running back and forth on this stretch. Consider how many cars such a service would keep out of the centre of Aberdeen, and think of the inconvenience that would prevent to the people there. In Brussels there is a fast rail service between the city centre and the airport. It covers exactly the same distance and operates in the same conditions as exist between Aberdeen


and Dyce. With an inventive approach and a modern attitude we could make much greater use of our railways.
I hope that British Rail and the Government will put on their thinking caps and do something constructive about the railway services in North-East Scotland.

8.47 p.m.

The Under-Secretary of State for the Environment (Mr. Neil Carmichael): I am always happy to discuss railways and I am grateful to the hon. Member for Ross and Cromarty and for having initiated this debate tonight. We debated the railways yesterday evening, and I advise the hon. Member for Aberdeenshire, West (Mr. Fair-grieve) to read the speech by the hon. Member for Aylesbury (Mr. Raison), because it would seem that the two hon. Members are somewhat at cross-purposes. One of the things we were being cautioned about last night was that the £340 million subsidy to British Rail could not be extended much further. We were told not to be romantic about the railways, but it is difficult not to be romantic about them, because they are such a wonderful subject to study and become involved in.
One does more harm to the railways by trying to over-stretch them than by considering seriously the job they are cut out for. They can do a very great job. I believe that the people in the north and central belt have a sincere and understanding interest in their railway services, which provide a safe all-weather transport system for passengers and goods. The affection which we Scots have acquired for our rail services lies in recognition of the valuable contribution that they have made to our social and economic life. This is probably no more true than in the North of Scotland. Although the railways provide essentially a nation-wide service, they nevertheless impinge closely upon the life of local communities.
However, in the North of Scotland, especially with the discovery of reserves of oil in the North Sea and the consequent demands of the exploration and production industries, there has been given to the railways and to the local services a national importance which perhaps they did not have in the days of which the hon. Member for Aberdeenshire, East (Mr.

Henderson) spoke, when there were the drastic Beeching cuts. That is something that the economists will be arguing for a long time. Was that the right time to do it? Should it have been done? Nevertheless, I believe that if such an exercise were done now there would be considerable changes, especially in the North of Scotland.
Whilst Scots are generally pleased to be intimately involved in the exploitation of their new-found indigenous natural resources, which mean so much for national economic prosperity, they are rightly concerned at the effects that the imposition of this additional demand has on their rail services. They are also anxious to see that the quality of service in its widest sense is improved.

Mr. Hamish Watt: Does the hon. Gentleman not agree that there is great urgency, because the oil services are now utilising roads? The Aberdeen-Inverness road was never meant to carry the traffic that it is now carrying. Does the hon. Gentleman agree that many of the towns and villages do not have suitable bypasses, and that therefore there is a greater urgency to move more traffic on to the railways?

Mr. Carmichael: I hope that I shall be able to deal with that matter in more detail. We should also remember that while it is true that there is a great deal of money being spent on the A9—approximately £130 million—it is the Government's duty to ensure that transport facilities are provided in sufficient quantity and of sufficient quality in order that the development of our economy is not restricted for the lack of adequate facilities for the transport of goods around the country.
I have great sympathy with the hon. Member for Ross and Cromarty over the great irritation caused by the fact that in the railway system one does not know what is happening when there is a hold-up or an engine has to be changed. Many of the little matters become big matters when one is travelling in an unheated train. It was urged on us yesterday that the Government should not become managers of the railways. That job is for the experts on the railways. I am sure that, the point having been raised tonight, the General Manager of the Scottish Region of British Rail will pay even more attention to what the hon. Gentleman has said.
These are matters which are important in running the railways, but which, at the end of the day, only the management of the railways themselves can investigate. I hope that I have the hon. Gentleman's understanding when I say that I do not propose to deal with the detailed points that he raised.

Mr. Gray: I do not expect the hon. Gentleman to deal with the detailed points, but these matters have been raised on many occasions by hon. Members without success. If one cannot shout about them here, where can one shout about them? One can only hope that the message will eventually get through.

Mr. Carmichael: This is what I suggested. The very fact that the hon. Gentleman has raised the matter again in the House will provide an additional spur to the Scottish Region of British Rail. But it should also be a responsibility of Government to ensure that people can easily travel to work and to the shops and to ensure that there are facilities for leisure travel.
It must also be borne in mind that the Government have an overriding responsibility to ensure that these needs are met in the most efficient fashion, so that undue pressure is not placed on the nation's limited resources, to the detriment of other equally important programmes. Transport is just one of the many aspects of our economic system for which resources must be provided and between which the Government must strike a balance. That is precisely what my right hon. Friend the Chancellor was speaking about earlier today.
Yesterday we discussed the vast sum involved in both the revenue support of the railways and capital investment. It is often said that in transport matters, particularly concerning the railways, Scotland—especially the North of Scotland—has had a raw deal from both the Railways Board and the Government.

Mr. George Thompson: I know that this is a debate about railways in the Highlands, but does the Minister agree that in the South-West of Scotland we, too, have had a raw deal, in that the A75 has to carry traffic for which it was never meant? If the railway line had not been subject to the Beeching axe, we should have been in a better position to attract new industry into the area today.

Mr. Carmichael: One day we can, perhaps, have a debate on the effects of Beeching. I have no objection to the hon. Gentleman's entering the debate. I thought that he was going to speak about the Highland railways. I hope that practically every Scot has travelled on the Kyle line or on the line to Fort William and up to Mallaig. The Highland line means a great deal more even to the Lowland Scot than to people in the rest of the country.
If the railways had still been open in the South of Scotland they might have been able to make an important contribution, but we must always remember the expensive nature of the railways. If they are correctly used, with the correct traffic and the correct level of traffic, they are a most efficient way to move large numbers of people and large bulk traffic. In the absence of those conditions, they are not a very efficient way to move things. In considering transport matters, the Government must ask what is the best way to do the job.

Mr. Andrew Welsh: What form of inexpensive transport exists for these areas? If the railways are axed, and then bus services are reduced, how do people in rural areas travel?

Mr. Carmichael: This is a subject close to my heart. I have been doing a great deal of work recently on rural transport. It is a difficult problem, for which there is no easy solution. In the past 20 years or so we have seen the increased use of the motor car. Even if all the railways were reinstated tomorrow, large areas of the country would still have a need for a study of rural transport. The railway network was probably more widespread in these islands than in any other part of the world. That was part of the problem. There were railways just about everywhere. The motor car and the petrol and diesel engine have now spread communities so much that even if we renewed every railway line we should still have the difficult problem of rural transport.
In most cases a railway is not a very efficient or economic way to provide rural transport. This is one of the points of contention over Beeching. The railways have an extremely important job, which


only they can do, but they must be tailored for the job. We have only to look at a map of the Scottish railway system to see that a great many services were retained. The unique contribution to the social and economic well-being of Scotland was considered to be sufficient justification for their retention.
The Transport Act 1968—I was a member of the Committee which sat for a long time examining the measure—introduced a system of Government grants ensuring the continued operation of the railways. The Government appreciate that there is no possibility of a national rail passenger network of anything like the present size becoming financially autonomous. As a result, we have in the 1974 Railways Act, extended and developed the support arrangements of the 1968 Act to incorporate the entire passenger system. We have placed the Railways Board under an obligation to continue to operate the passenger network at substantially the present size and quality. We are paying compensation for the consequent losses. There could be no clearer indication of the Government's recognition of the value of the railway system.
The benefits of this new attitude to railway services for the North of Scotland were manifested in July 1974 by the announcement of my right hon. Friend the Minister for Transport that the Highland line from Inverness to Kyle was to be reprieved and the closure proceedings on other lines were to be halted at once. Many people who have enjoyed a journey through the beautiful countryside along this line were delighted at this reprieve. The hon. Member spoke of the work done by people to save the Kyle line. He did not speak of "MacPuff". I took some part in that campaign before 1964. I have been on the Kyle line several times and am pleased to see that there is a fair amount of use of that line. Nevertheless, the hon. Member must know of the large costs involved in keeping it open.
While the hon. Member is principally concerned this evening with securing improvements to rail services in the North of Scotland, he is, I am sure, appreciative of the quality of Anglo-Scottish services. Commuting as we do between our con-

stituencies and Westminster has given us the opportunity to see the achievements of the Railways Board and its enthusiastic work force. Electrification of the West Coast main line last year has reduced the journey time between London and Glasgow to five hours, making the day return by rail a comfortable, practical proposition. Journey times on the East Coast line to Edinburgh have been steadily reduced in recent years and introduction of the high speed diesel train in 1977 will give even further improvement, reducing the journey time to below five hours. This shows that the Railways Board is looking at the areas where there is an undoubted need for improvement where there is the traffic, and where rail is the ideal way in which to move people.
While the railways are responsible for planning and operating the railways, the Government accept their responsibility to make sure that there are adequate facilities to meet the sudden increase in demand for transport which has occurred as a result of the discovery of North Sea oil. More people are travelling to the North-East of Scotland on business. On the freight side there is a need to carry raw materials, such as steel and cement for the construction of oil rigs and for the servicing of off-shore oil installations.
Large quantities of steel are also required for the building of pipelines to carry the oil when it comes ashore. In addition to the immediate needs of the oil industry it seems likely that there will be a long-term increase in the demand for transport as oil-related industries develop in Scotland. The provision of the required capacity to cater for these developments is being treated as a matter of some urgency. I can assure the hon. Member that the Government are aware of this situation.
The Perth-Inverness line is the key to rail transport to the North of Scotland. As I announced yesterday—I am sure the hon. Member will have received a note about this—I have asked the Railways Board urgently to consider what investment is required to enable the line to efficiently carry the increasing traffic volumes, both freight and passenger, that will occur as North-East Scotland is developed.
I know that there is presently much public disquiet about the unpunctuality


of passenger services on this line. Last year I travelled up the line with Mr. Bobbett and I noted the single tracking in parts and the steep gradients. The unpunctuality is the result of the lack of capacity, which causes trouble when one train service impinges on another. I need hardly say that any proposal made by British Rail for investment on this line will be considered quickly and sympathetically by my right hon. Friend the Minister for Transport.
Both my Department and the Railways Board have received suggestions that the rail commuter services between Tain and Inverness should be improved. I have taken this up with the Railways Board. The board tells me that improving the services would result in a substantial increase in the financial losses made by the existing services. In present economic circumstances, no one would lightly add to the Railways Board's deficit, but we recognise the special circumstances of this region and we are therefore considering whether an experimental improvement in the services would be justified.
If it were decided that the experiment was justified and it showed that the augmented service was being fully used and making an effective contribution, we should want it to continue, but if it showed that the increased service was not justified, we should need to revert to the present position.
I was interested to hear about the West Highland line to Mallaig and the need for investment in rolling stock. Again, in the first instance it is a matter for the Railways Board to decide on its investment programme. The board then puts the programme forward to my right hon. Friend. I do not think that it would be right for me to intervene before any proposals are received by my Department, but I am sure that the board will take note of what has been said tonight about the service. One purpose of an Adjournment debate is that people outside the House are made aware of what is going on, although there is a good turnout of hon. Members tonight.
The need for investment may seem so obvious to hon. Members as to remove the need for the Government to consider any proposals. Alternatively, hon. Members may wonder why the Government do not put forward proposals of their own. I shall deal with both points briefly.
First, on the question of Government control, as I said earlier, rail competes for scarce resources with all sorts of other investment which society values. The Government must ensure that resources are allocated in accordance with a coherent pattern of priorities and that individual projects will yield a satisfactory return.
Secondly, why is an investment programme not made by the Government? The main reason is that the Railways Board has been established by Act of Parliament to manage and plan the development of the railway system. Only the board has the expert knowledge to work out a sensible investment scheme. In relation to Perth-Inverness, the board must forecast how much traffic is likely to use the line and what sort of traffic it will be, so as to determine how much evtra capacity needs to be provided. It has to determine not only how best to increase track capacity but also what is the requirement for new rolling stock of various kinds.
Many factors have to be considered when determining how much capital expenditure is needed. For example, the amount of investment necessary will depend on how many oil platform building sites are authorised in the North of Scotland. It will also depend on the extent of other industrial development in the north and on the length of time required for the infrastructure work. All these aspects have to be carefully weighed. However, I assure the hon. Gentleman that the board is being given every assistance in preparing its appraisal and all the information that the Government can provide. I also give the hon. Gentleman an assurance that the Government will consider urgently any investment proposals which the board puts forward as a result of its appraisal.
I hope that what I have said will clear up some of the misunderstandings about the Perth-Inverness line that have recently appeared in the Press. It has been suggested in some quarters that nothing has been done about it and that nothing is being said about it. Even in some of the technical journals, which should know better, it has been suggested that the Government and the board may have been at cross-purposes. I can assure all hon. Members that that is not true.
The Government expect the board to do the technical job of making an assessment and considering the traffic involved. The Government perhaps, are capable of doing that, but the railways are geared to do it. Once the board has come forward with its proposals it is for my right hon. Friend to consider them in the light of the debate that we had last night on the total allocation of the railways and the allocation for the passenger services. It is for my right hon. Friend to decide on the possibility of increasing the grant or in some way of helping the board to provide the service when he considers that it is right that we should provide in that part of Scotland.

ENERGY CONSERVATION

9.11 p.m.

Mr. Peter Rost: I am most grateful for this opportunity to raise the important matter of energy conservation policies. I appreciate very much that the Under-Secretary of State is in attendance and that he has put himself out to be here at short notice. I hope that he will not find the late hour a waste of his time.
One of the main reasons for taking this opportunity of raising the subject of energy conservation is that we have had no opportunity for a detailed debate on the measures and the policies initiated by the Government in their provisional interim measures which they announced last December. We have had a debate on energy, but that was a wide-ranging debate which covered the Government's improprieties in the North Sea and various other matters. The fact is that we have not had an opportunity to discuss in detail short, medium and long-term strategy and the more rational use of our energy. It is important that we should do so.
I feel that the Government have not given an opportunity for such a discussion because their own measures have not had time to mature. On the other hand, time is running on and we have had more than a year since the upheaval of oil price increases. Further, we have had more than a year of the present Government, during which time it has become increasingly more urgent that we develop an energy strategy. We have had

today the fourth Budget in 13 months. It emphasised again the fact that we are living substantially beyond our means. We are running a huge trade deficit ranging between £2 billion and £3 billion a year.
Imports of oil are a major contributor to that deficit. It is costing us approximately £10 million a day to import our oil. Of course, we expect to be self-supporting by 1980, assuming that the Government do not frighten away all the oil companies from the arduous, risky and expensive work in the North Sea. We shall be self-supporting and no doubt we shall even be able to export, but I rather suspect that it is because of the feeling that we shall be self-supporting and that we shall have enough of our own resources that there is a lack of urgency in the programme for conservation.
I want to be kind to the Department of Energy tonight, although probably following previous encounters it is not what the Minister expects from me. I want to try to be fair and to suggest that it is not entirely the Department's fault that we have at present no energy strategy. The Department has not been established for that long a period. Indeed it was set up by the Conservative Government. It would be unfair to blame the Department of Energy for all the failings which are an accumulation of several decades of misguided policies—ranging from the dependence on cheap oil imports and the running down of our indigenous coal industry to the assumption that we would have adequate energy resources for as long as we wanted, and cheaply.
The result was that over many years we failed to learn the need to use our energy more efficiently. The time is now past when we can afford to continue to waste as much as we do. The fact is that we waste far too much energy. It is not a matter of switching off lights or of brushing our teeth in the dark. That is only fiddling with the problem. We must get to grips with the major areas of waste which continue. It is only fair to give credit to the Government for having initiated an advertising programme which draws the consumers' attention to the points at which savings can be made, and it is also fair to give credit to the Government for having begun the policy of a realistic pricing of energy rather than going for subsidies which simply


encourage waste. Therefore, I give credit where it is due.
On the other hand we are entitled to question whether, after 14 months or so, the Government should not have made a little more progress in developing a medium and longer-term strategy which would ensure that we wasted less of our energy. I wish to mention one or two areas in which I think action could be taken. I hope that the Minister will regard my suggestions as constructive, even if somewhat critical.
Opposition Members have had to endure a fair amount of criticism from the Government and the Department of Energy suggesting that we were attacking the Government's policy—or lack of it—without putting forward counterproposals. Time and again it has been said, "Well, what would you do?" Many of us have put suggestions to the Government when opportunities have been made available. I am not saying that those suggestions have been ignored, but it is right to put on record that some of us have ideas and constructive proposals to put forward and have done some research in this area. Therefore, we may have something to contribute to the policy which we hope will emerge, in the national interest, without too much further delay.
The first major criticism I wish to make—and it involves the major area where our strategy should evolve—relates to the area of governmental priorities. It is very difficult at a time when the Government are under extreme pressure to cut Government spending to make suggestions which will increase expenditure in a different area—an area which many members of the Government have not been prepared to regard as an important priority. On the other hand, I believe that this is now such an important priority that there should be greater Government spending on energy conservation. When I talk of priorities, I suggest that it will pay us as a nation to cut back on other spending—for example, on food subsidies or whatever one happens to regard as less essential—and to make some of those national resources and capital investment items available for energy conservation. The reason is that investment in this area will produce a fairly quick return in terms of our balance of payments, whereas a large proportion of Government spending,

however essential, does not produce an equivalent balance of payments saving.
This is the primary issue. If there is to be an energy strategy in the United Kingdom, the Government must accept as an important priority the fact that energy saving will be of major benefit to the economy in terms of the balance of payments, of maintaining our standard of living and of curbing inflation. It is only by means of positive investment that we shall be able to produce the savings in energy, or the less wasteful consumption of energy, which are required.
The Government must first change their investment priorities in the electricity supply industry. For many years past we have been in a rut. We assume that because the demand for electric power rises every year we must automatically increase the supply, or suffer power cuts. I challenge that basic assumption, because we waste far too much of our electric power. If we wasted less power and spent a little money on economy measures we should not need to spend about £700 million a year on the construction of new power stations. Some of that capital could be directed to energy-saving projects.
We are often told that it is not possible for the Government to provide capital for energy conservation measures, such as grants for thermal insulation or other grants to industry, because the money is not available. Money spent on energy conservation would produce a greater capital saving than that spent by the Exchequer on building vast new power stations.
I hope that Government thinking will be directed to the electricity supply industry. At present every two units of heat produced in the electricity power stations result in one unit of electricity. Those units of heat go up the cooling towers or into the rivers. That is a phenomenal and unnecessary waste of energy. The technology for the utilisation of waste heat already exists. The process has been increasingly undertaken in other countries for many years. The waste heat, which is now being deliberately dispersed through the ghastly, environmental-polluting cooling towers, can be used for space heating and for industrial purposes.
Why are we not doing it? What is holding us up continuously? We have the monstrous waste of about two-thirds


of our energy in this present system of electricity generation. The average thermal efficiency of our generating system is just about the lowest in Europe.
In view of the time, I do not wish to go into a great deal of detail, but I draw attention to the very large number of specific examples in other countries where waste heat from power stations is utilised. In fact, it is even happening in this country. Just outside my constituency at Spondon a power station which the CEGB would regard as being too small to be of interest has a 70 per cent. thermal efficiency because the waste heat is used to provide heat for British Celanese—and it was built for that very purpose. ICI produces a great proportion of its own electricity, and it does so in order to utilise the waste heat. It gets a thermal efficiency of about 70 or 80 per cent. in the process.
In the Ruhr, a great proportion of industry and district heating is combined, with much higher thermal efficiency. District heating systems combining electricity and steam generation are being installed increasingly on the Continent—in France, Denmark and Sweden especially, where this is very well established.
London has 14 power stations. Only one small portion of one station—Batter-sea—uses its waste heat. Waste heat from these power stations could heat the whole of London if suitable conversions were provided. There are plenty of examples in other parts of the world. There are even examples in this country. The truth is that we are not getting on with it.
With one or two other hon. Members, I have been trying to draw attention to these matters for a number of months. It is a little discouraging to be snubbed by Ministers in replying to our Questions. It does not help to promote the argument.
I last raised this specific matter on 7th April. I asked what progress was being made in the research at Harwell on the more efficient utilisation of fuel in power stations by combining the generation of electricity with the sale of heat. The Under-Secretary—I hasten to add, not the hon. Gentleman who is to reply to this debate—said,
The combined generation of electricity and heat from power stations is primarily the

responsibility of the electricity supply industry."—[Official Report, 7th April 1975; Vol. 889, c. 806.]
I accept that it is the responsibility of the electricity supply industry, but surely it is also the responsibility of the Department of Energy. When we are wasting two-thirds of our fuel in the existing system of power generation, it is not good enough, if we are to have a Department of Energy which presumably accepts responsibility for initiating energy conservation programmes, for Ministers in that Department to say that they have no responsibility.
We have to analyse why Ministers say that they have no responsibility and why they continue to suggest that this is a matter to be sorted out by the electricity supply industry. I suggest that the reason goes back to the Electricity Act 1957. It may be that we are lumbered with that Act. If we are, it is time that we amended it. It gives statutory powers to the electricity industry to produce electricity as efficiently as it can. However, it does not give any directives to the electricity industry to sell heat or any directives on fuel efficiency.
Fuel efficiency is much greater in other countries because on the Continent it is the local authorities or private enterprise industries that set up power stations. They are able to produce electricity and to sell the waste heat without being restricted by the monopoly of a nationalised industry. Therefore, I ask the Under-Secretary to look at the existing statutory powers which restrict the extension of a more efficient system of electricity generation in this country together with the sale of heat. It is only when that is done that we shall make progress.
I have suggested two major areas which need urgent action. First, we must establish priorities for capital investment and, secondly, we must reorganise the electricity supply industry.
The Department of Energy should get to grips with the problem and find out, if it has not done so already, what is happening in the rest of the world. The Electricity Council should be scrapped or, at least, reorganised into an energy council or board. The statutory directives would have to be changed to make it responsible for converting the fuel as efficiently as possible and for enabling it to sell the heat. There is tremendous


advantage to be achieved in such a programme.
I do not suggest that there are no difficulties. We know that there are. The present policy of building more large power stations in remote areas presents difficulties for district heating, but there is no reason why these stations should not be planned with some local industry surrounding them. The environmental problem would equate itself because the cooling towers would not be necessary. They are the worst environmental problem. Instead, two or three factories would utilise the heat. Some of the less efficient power stations in urban areas are about to be closed down because the electricity boards do not regard them as efficient enough. Yet these are just the kind of power stations which are ideally suitable for conversion. District heating schemes could be adapted from them. This possibility should be seriously investigated. The time has come when the Electricity Council must be changed into an energy council which should put greater emphasis on a more rational use of fuel.
The third area in which the Department of Energy should accept some responsibility and take some action is research and development. A little research and development is taking place, but it is inadequate. It overlaps and it is diffuse. If many important areas of research and development were to be given greater priority, we could make a major contribution more quickly. It is the Department's responsibility to co-ordinate this research effort.
I want to give one or two specific examples of areas in which we ought to be spending a little more. We ought to be spending more on the fast breeder reactor system in order to give that progress a little more push. Second, we ought to be spending more on remote-control coal mining systems. There is no reason why we should not be moving ahead towards developing remote-control coal mining. If we do not get on with the research it will be decades before we achieve anything.
Third, we ought to be giving greater priority to research and development on tidal power, wind power, solar power and wave power. We all know that there are feasibility projects which need a little

more encouragement on the research and development side so that we may reach the stage at which we can do something to develop alternative energy sources. Taking the longer-term view, we need to encourage them so that we do not use up the breathing space which the North Sea hydrocarbon resources will give us for 20 or 30 years, and perhaps 40 years, and then find at the end of that period that the tremendous time lag required to develop alternative resources has been squandered.
The fourth and final area—in which I would mildly rebuke the Department of Energy for not having got on with it—is seeing that there is greater co-ordination between Government Departments. I appreciate that it is very difficult for the Minster to throw his weight about in this area. However, if we are to have an energy strategy, it simply will not do if other Government Departments are not prepared to accept the priority for it and to take the necessary measures to implement it.
To give specific examples, if one suggests that there should be more thermal insulation in housing, assisted by loans or grants, the Department of the Environment says that it does not have the money and that it is not interested in energy conservation. If one asks why new or existing Hospitals are not adapting themselves to more efficient fuel systems or better insulation, one is told that the capital investment is not available to do so and that in any case the Department of Health and Social Security is not concerned with energy conservation. The same thing applies with the Department of Education and Science when one asks why we are not building our schools to greater standards of fuel efficiency. I could continue with many other examples.
There is no co-operation or co-ordination between Government Departments in this matter. The reason is that the Department of Energy has not asserted itself. It has not been given the correct priority within the Government. I hope that the Under-Secretary will tell the Secretary of State tomorrow that he ought to throw his weight about a bit more, to assert himself in Cabinet and to state why it is essential that a more rational use of our energy is given greater emphasis within Government planning and the co-ordination of Government Departments, and that


he ought to ensure that the capital investment is made available.
The time has come when the nation can no longer afford to allow this situation to drift without an effective strategy. It is also time that we accepted that an energy policy and energy conservation are not two separate subjects. They are integrated. It must be accepted that the problems arising in both can be solved only in a co-ordinated way. The need now is for us to use the breathing space that the North Sea will give us to develop far more efficient uses of our energy in the areas I have suggested. No doubt there will be other areas, but I have suggested four in which I believe action ought to be taken. These are the reorganisation of our electricity supply industry, greater co-ordination between Government Departments, greater Government priority for capital investment, with fiscal incentives, and a more positive research effort. These are four lines of attack in which so far we have been completely inadequate. The Department of Energy must now sell the need for a more rational use of our energy not just to the country, as it is doing in its advertising campaign, but to the Government, if we are to make any progress at all.
The more effective use of our energy can make a major contribution to the balance of payments. It costs less to spend our capital wisely on energy conservation than to spend our capital wastefully on building new generating plant to produce electricity which would not be needed if we implemented conservation programmes. An effective policy for the next few years could help to maintain our living standards or to raise them and could make a contribution to the gross national product far more effectively than Government spending in other areas which do not produce such an effective economic return.
We must, above all, end the imbalance which still exists in Government priority. The imbalance must be ended by changing from an attitude of increasing supplies to one of increasing efficiency. This is where the priority is wrong and this is where it must be changed. There is not all that much time left, and certainly there is no more time left for complacency. We must stop wasting the national wealth in this way.
I know that the Under-Secretary of State appreciates these problems, and I am not criticising him. Nor am I necessarily criticising his colleagues in the Department. What I am saying is that they must make a greater effort to put their case across to the rest of the Government and to the country.

9.42 p.m.

Mr. William Hamilton: The hon. Member for Derbyshire, South-East (Mr. Rost) made an extremely constructive speech, less abrasive than his normal contribution in this House, and I shall try to respond in the same spirit.
This debate reminds me very much of an idea that was put forward some years ago by the late Dick Crossman when he was Leader of the House. He recommended an experiment with morning sittings of the House. I have long thought that instead of having an Adjournment debate when all the Government business has been finished and everybody has gone home, when a Minister and a backbencher are hanging around and they alone are there for an Adjournment debate coming on at an uncertain hour and causing the maximum inconvenience to everybody concerned, instead of having this kind of debate at this hour, with this kind of attendance and hardly anybody in the Press Gallery, we could have two or three such debates at morning sittings. We could have them, say, on Monday morning and Wednesday morning, or, indeed, every morning if necessary, and only those who were interested would need to attend. It would not inconvenience the civil servants. It would not inconvenience the Minister concerned because it is usually a junior Minister—although I usually find the ability of a Minister is in inverse proportion to his status in the Government. I say that with great affection to my hon. Friend the Under-Secretary of State—and I think he knows exactly what I mean.
If one had that kind of thing, not only would one get greater publicity for this kind of debate but it would be a convenience to hon. Members, civil servants and the Under-Secretary himself. instead of having to sit here he could be on a train to Scotland, on the way to his constituency. However, I think that the debate is serving a useful purpose.
I can agree with a lot, almost all, that the hon. Gentleman said. I hope that he will not hold that against me. I do not know whether he has sought to cost what he is suggesting or has tried to work out a time scale. It is perhaps unfair to suggest that he has not done those things because he obviously could not do so. The hon. Gentleman has put forward proposals for the Government to consider.
I agree that as a nation we must be more energy conscious than we have been hitherto. I must remind the hon. Gentleman— here I get a little acid myself; there is no one on the Opposition Front Bench— that the Conservative Government conserved energy in a way that we would not wish to follow. They stopped the miners digging coal and then we had a three-day working week. If the Government pursued policies which brought about a confrontation with the miners, the power workers, or any other group of key workers in the energy-producing industries, we could conserve energy, but we do not want to save energy in that way.
On the contrary, the Chancellor today went out of his way to make it clear that he will strive to prevent an upsurge in unemployment. That means a full-out industrial effort which will use more energy, unless we pursue some of the energy conservation policies of the Conservative Government. I intended to speak about some of the proposals put forward by the hon. Gentleman. There is no need for me to remind him that the Conservative Government allowed the nationalised fuel industries to encourage the wasteful use of energy. The hon. Gentleman knows that they were prevented from charging really economic prices for fuels and that encouraged the wasteful use of energy.
What disturbs me and many hon. Members on both sides of the House is that we shall see fuel economies by the purse. In other words, both individual domestic and industrial consumers will be compelled to save simply by price.
I had a letter, either yesterday or the day before, from somebody in Perth—a Labour supporter, but not a constituent of mine—who said that he would not vote Labour any more because of the outrageous increases in the price of electricity. He asked why the Government did not give a 20 per cent. subsidy to electricity

to stop these increases. That is what the previous Government did until the February 1974 election, and that is why the present Government are having to impose swingeing increases in prices which are now being pushed through the pipeline, or the electricity wires, as the case may be.
The injury has been compounded by simultaneous increases in the prices of all fuels. That situation is bound to direct attention to the more economic use of all fuels. Like food, the days of cheap fuel are over. Nobody can pretend that we can return to the days of either cheap food, whether inside or outside the EEC, or cheap fuel, by whatever method. I do not think the hon. Member for Derbyshire, South-East, was suggesting that, but, rather, a more economic use of fuel. I may be out of date, but I recall my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Thomas) pursuing the question of having an examination of the price mechanism to make sure that instead of having a preferential tariff the more one consumed, one should have a preferential tariff the less one consumed.
This is a very important matter, particularly for the small consumer, who, by definition, is generally in receipt of a small income. I am thinking particularly of old people. I believe we will all have received, this week or last week, from one of the charities dealing with old people—whether Age Concern, Help for the Aged, or Shelter I cannot remember—a document giving statistics about the number of deaths from hypothermia among old people. One does not want to ration fuel by the purse for such people if it is going to mean more deaths among the old.
We have been very lucky. If we had had a severe winter we would have felt the pinch much more than we have. We have been fortunate, in the sense that we have had one of the mildest winters on record. Up to the last year or two we have been very profligate in our use of fuel of all kinds, not least coal. I come from a coal mining family. My father was a coal miner. I represented a coal-mining area. I say "represented", because it no longer is one. Most of the pits in my constituency have been closed. But we have the kind of automated mining of which the hon. Gentleman was


speaking. I do not know whether he has visited the Longannet power station in Fife, on the north shore of the Firth of Forth, and seen the coal mines there. The coal is power-loaded on to a belt and taken direct into the power station. It is virtually all done by automation. I do not know how practical it is to repeat that in other ways, but certainly it is one of the ways in which we can use our fuel resources for the maximum benefit of everybody.
I shall mention one or two other points which underlie what the hon. Gentleman has said about the insulation problem. We have paid far too little attention to the savings that can be obtained on the domestic front, and particularly on the industrial front, by insulation. Despite the Government's determination to cut public expenditure, it would be expenditure well worth incurring. We always tend to look at the figures on a balance sheet and say, "It is going to cost us this much" without looking at the other side of the ledger and asking, "What will this save in terms of energy?" The Government should try to do some arithmetic of that kind and work out with local authorities what estimated savings would be achieved if old people's individual houses or old people's homes were insulated. I am fairly sure that local authorities could work out statistics of this kind.
I believe I am right in saying the Government provide grants to encourage industry to insulate. The late Gerald Nabarro long ago introduced a Bill on this very subject.
There were two other points which the hon. Member did not mention, one of which was the question of staggered hours. If working hours could be staggered more, it would spread the electricity load. There is a problem in providing the enormous capital sums required to construct power stations when it is not possible to utilise those power stations in off-peak hours. This was the principle behind the system of off-peak storage heaters. The owners enjoyed cheap electricity at off-peak rates. Perhaps it would be worth encouraging industry to spread the load over 24 hours.
The second point concerns the provision of a more efficient public trans-

port system. I plead guilty to driving into this place every day in a car of my own. I know that that is very wasteful. If there were an efficient public transport system, sufficiently efficient to encourage me and thousands like me in the big cities to travel to work on it, we could make enormous savings. I belong to a movement in Scotland that wants increasing electrification of the railway system and a reduction in expenditure on the road system. We want this both from an environmental point of view and from the point of view of energy saving. The scheme is not being treated with the importance that it deserves.
I turn now to the subject of housing. Some weeks ago I raised a question with the Department of the Environment about the construction of timber houses. There is a housing shortage and there seems no prospect of meeting that shortage within my lifetime. Perhaps I am being pessimistic, but it is a daunting prospect. In my constituency, as in other constituencies, no doubt, there are firms which build timber houses. These houses are very much cheaper to construct and are much better insulated than traditionally-constructed houses. In Scotland, however, we are in the absurd position of importing Norwegian timber houses, even though a Scottish firm could satisfy the demand. I mention that just to show how the possibilities in this area are legion if only we get down to examining them.
I hope that the Minister does not treat the speech by the hon. Member for Derbyshire, South-East with the contempt that the hon. Member usually gets and sometimes deserves in this House.

9.59 p.m.

Mr. David Mudd: I followed with great pleasure the telling points raised by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) and the wise remarks of the hon. Member for Fife, Central (Mr. Hamilton). I approach the debate with a certain degree of reservation, because I shall be referring briefly to the problems of Cornwall, but let me set the hon. Member's mind at rest and say that I shall be referring to the county of Cornwall, and not the Duchy.
This short but worthwhile debate has repeatedly covered certain aspects. It


has dealt with such matters as insulation, power stations, and lack of co-ordination between the Department of Energy and one or two other Departments. The lack of co-ordination is perhaps symptomatic of the fact that the Department of Energy is our newest Department of State. It has grown from a baby to a toddler and, like toddlers, it tends to waver a bit from side to side and perhaps not make the greatest impact on those with whom it comes into contact.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dormand.]

Mr. Mudd: Therefore, I suggest that the Department of Energy considers co-ordinating with two of its sister Departments, perhaps, jogging them into action. First, the question of thermal foam insulation has been raised. Evidence has recently reached me that thermal foam insulation contractors operating in Cornwall have come up against impossible stone walls put up by the local authority. If anyone wants to put in thermal cavity insulation he is told by the local authority that he must first obtain permission under the building regulations of 1972. Those regulations were evolved long before thermal foam cavity insulation became the "in" thing and energy conservation became of vital importance to the United Kingdom.
I hope that the Department of Energy can at least have talks with the Department of the Environment on an up-to-date circular to local authorities asking them to cut these corners. This is important because anyone who wants his home insulated is in many ways a customer of impulse. If a customer is told that he has to apply to the local authority he will throw up his hands in despair, because he believes that it will be six months before he gets a decision one way or the other, by which time the cost will have become prohibitive.
The second area of liaison concerns the Department of the Environment and one of the stranger rulings of the British Broadcasting Corporation, which has decided that it will not transmit the BBC2

test card to West Cornwall during non-transmission hours in the daytime. This is our loss, but it is an even greater loss to the television installation and aerial trade. Time after time the installers take a new set to someone's house—which entails a drive of 10 or 15 miles down the highways and byways—only to find on arrival that there is no signal against which the set can be tuned. Therefore, the set is loaded back into the van, taken to the depot and delivered again later the same day. As a result there is a colossal unnecessary consumption of fuel.
Moreover, with the absence of a BBC2 test card during normal working hours against which the engineers can tune the set, much work has to be done in the workshop at night when BBC2 is on transmission. The result is that extra electricity is burnt in the workshop. Therefore, the simple expedient of getting the BBC to restore the BBC2 test card would cut down a waste of petrol and certainly a waste of workshop electricity at night.
On the third point, I hope to have no more at this stage than the friendly ear of the Under-Secretary of State. It concerns the future of the power station at Hayle, in Cornwall, which has now been given two years' formal notice of closure, which means that to all intents and purposes it will cease operating in 1977. This will involve withdrawing 130 jobs from an area of already chronic, extremely high unemployment.
The Central Electricity Generating Board says that perhaps in the 1980s it will put in a turbine generating station there. However, whatever happens, there cannot be an overlap between the closure of the coal-burning plant and the arrival of the new one. When I ask the board what it will do about the 130 people who will lose their jobs, it says that some will go through natural wastage, one or two will go through premature retirement, and the rest will be found jobs somewhere else within the industry. This is economically wasteful and socially unacceptable. It is economically wasteful to reject 130 people who are generating power. It is unacceptable in social terms that many people who are in their 50s should be told to find a job elsewhere, because they will not be readily acceptable elsewhere. Many of the


younger people who would be absorbable elsewhere would say "We have our roots in Cornwall. Why uproot us to suit the whim of a Government Department?"
The board should be asked to reconsider the closure proposals. First, it is a coal-burning station—one of the few in the south-west region which burns indigenous fuel, thus reducing dependence on imported oil supplies and indirectly providing work, revenue and prospects for coal miners. Therefore, there is a case for its continuation in its coal-burning rô le. Secondly, it could be simply adapted for the burning of refuse to provide energy. There are many social, economic and environmental reasons why I hope that the board will be persuaded by the Secretary of State for the Environment to reconsider the proposal.
I am delighted to have had the ear of the House, to have had this opportunity of joining my hon. Friend in the debate. which we have had on his initiative, and to have had the unexpected benefit of the presence of the hon. Member for Fife, Central.

10.6 p.m.

Mr. Alec Woodall: I am pleased to follow the hon. Member for Falmouth and Camborne (Mr. Mudd). I fully appreciate his point about the social consequences of closing a power station. I come from a coal mining area, where we know all about the social consequences, having suffered all the pit closures of the mid-1960s.
As a miner for 41 years, I have seen much criminal waste of fuel, particularly coal. Most hon. Members and members of the general public have a picture of a coal mining village as a little cluster of houses around the pit, with a large, smoking heap in the background. The smoke from that heap was a criminal waste of coal. It does not happen today. Although many people will disagree, rock and waste will not burn. The large heaps in the pit villages in those days consisted of coal that was burning because of inefficient methods of cleaning coal. Even today, some people think that we sell the rock and waste and still do something mysterious with the coal that we produce.
I am a member of the National Union of Mineworkers, which has for years advocated a co-ordinated and integrated fuel policy. We have consistently stood out

against not only the criminal waste of coal after we have produced it but the criminal use of resources and money, particularly in advertising one nationalised fuel against another. I hope that the Government will take action towards an integrated policy.
I join my hon. Friend the Member for Fife, Central (Mr. Hamilton) in paying tribute to the thoughtful contribution of the hon. Member for Derbyshire, South-East (Mr. Rost), particularly in respect of what he said about waste heat from power stations. The Yorkshire area of the NUM has for long advocated that use should be made of such waste heat, and over the years we have put our money where our mouth is. The Yorkshire area has made loans to certain local authorities for district heating schemes. This has been one of my pet ideas for some time.
The Government should be doing far more research into the matter. I hope that my hon. Friend the Under-Secretary will be able to say that they are thinking along those lines.
In 1969 I had the privilege of visiting the German Democratic Republic, where I saw a new town to house 50,000 people, whose total energy requirements were met by a single power station. We should be moving in that direction.
The Yorkshire area of the NUM, together with the National Coal Board, helped by the Government, has done this particularly well in the Normanton Urban District Council area, in the constituency of my hon. Friend the Member for Pontefract and Castleford (Mr. Harper). It is one of the best examples of the modern use of coal in a mining area. There has been a lot of talk recently about the Selby coalfield. At the moment, while the inquiry is going on, certain assurances have been given about the way in which the field will be developed and the coal transferred to power stations in the near vicinity, particularly Eggborough, Drax and Ferrybridge.
I know the Barnsley Beb. seam. It is the finest seam of coal this country has ever seen. I should think that the whole of the economy of the Yorkshire coalfield was built upon the Barnsley Beb. seam. I would like the Minister to press the coal board about its intentions over this coal field. This is the finest seam of coal the country has ever had.


To put such coal into a power station, when most of it goes up the cooling towers, is wrong. I ask the board to look at this again. It might get some inferior coal, which the general public seem to think is being foisted on it at extortionate prices. Some of that inferior coal could be mixed with the Selby coal. I ask the Minister to press for as much research as possible into the better use of this excellent coal, rather than waste it, as millions of tons have been wasted, in generating electricity. It was after the Yom Kippur war that we began to appreciate the true value of coal. We should not waste coal as we have done in the past. I particularly ask the Minister to bear that point in mind in making any approaches to the coal board. It will be criminal to waste such an asset as the Barnsley Beb. seam.

10.12 p.m.

The Under-Secretary of State for Energy (Mr. John Smith): We have indeed had an extremely interesting debate on the important topic of energy conservation. I am sure that the hon. Member for Derbyshire, South-East (Mr. Rost) would not have predicted that he would receive such unanimous approval of his comments from the Labour side of the House. As he said, he adopted a slightly less abrasive style than is normal for him in the House. I hope that the unanimous approval he received from his discriminating audience will encourage him to refine and moderate the cool style he has adopted.
The hon. Member must wonder whether he is on the right right lines after hearing his speech praised by my hon. Friend the Member for Fife, Central (Mr. Hamilton), while my hon. Friend must wonder whether he is doing the right thing in approving what the hon. Gentleman says. But we ought not to get involved in political controversy on a subject such as energy conservation. it is proper for the Opposition to criticise the Government from time to time. My right hon. Friend the Secretary of State has made it clear that he is not too proud to learn from anyone. Any suggestions made by the Opposition, no matter how they are couched, will be received and considered seriously by us.
This is a subject of obvious national concern, in which we can all be involved, whatever our political persuasions. The

need for energy conservation remains, no matter what party or combination of parties is in power. I very much welcome the continued interest the hon. Gentleman has taken in this issue. He will note that his interest is shared by many other hon. Members, including the hon. Member for Falmouth and Cam-borne (Mr. Mudd) and my hon. Friends the Members for Fife, Central and Hems-worth (Mr. Woodall). Indeed, we have had an excellent series of speeches tonight.
My hon. Friend the Member for Hems-worth, whose wide knowledge of the coal industry is deeply appreciated by the House, made some interesting comments about thermal insulation, which had been touched on by the hon. Member for Derbyshire, South-East. I will later set out one or two things which the Government are doing on that. My hon. Friend referred to the Selby coalfield. It is difficult for anyone in the Department of Energy to comment on the Selby coalfield during the course of the planning inquiry, but I shall report to my right hon. Friend the Secretary of State for industry my hon. Friend's comments on the coal and make sure that what he said is fully appreciated by the Department of Energy and the National Coal Board.
My hon. Friend the Member for Fife, Central made some interesting comments on the need for energy conservation and the pricing mechanism. I assure him that these points are kept very much in mind by the Department.
The hon. Member for Falmouth and Camborne ingeniously brought in his constituency interest by referring to the power station at Hayle. In doing so he showed a proper interest in his constituency. I cannot say much about the power station, but I assure the hon. Gentleman that what he said will be studied with care by my right hon. Friend and officials in the Department.
The hon. Member for Falmouth and Camborne, like his hon. Friend the Member for Derbyshire, South-East, urged the Department to be an ambassador with other Government Departments. I hope hon. Gentlemen will not take it amiss if I say that it is the oldest technique in Parliament to ask one Department to get on to another Department. In this instance there is some merit in that, because the


Department of Energy is in the lead in energy conservation. I cannot comment on the activities of the Department of the Environment. We shall certainly take up the question of thermal foam cavity insulation which the hon. Gentleman raised and we shall consider his point about the BBC 2 test card. I am not sure that the direct responsibility of the Department of Energy extends to that and I do not undertake to communicate with the Department of the Environment about it, but we shall consider what the hon. Gentleman said in that regard.
The major speech in the debate was made by the hon. Member for Derbyshire, South-East. He stressed the need for the Government to put energy saving as a priority. Indeed we try to do that. The hon. Gentleman may criticise us from time to time. We are not immune from criticism, nor do we find it wounding if the criticism is constructive. We are giving energy saving a high priority.
The hon. Gentleman made an extremely sound comment in allying energy conservation with energy strategy. Indeed, the two are totally interlinked, even from the balance of payments point of view, never mind the energy accounting point of view. For every ounce of energy we save, the less we have to import and the less expensive investment we have to make. That is not sufficiently widely appreciated throughout the country. Although it is understandable that the hon. Gentleman should direct his criticism towards the Government—and the Government must shoulder the main responsibility—that is a message that should go out to private householders and private as well as public industry.
We have seen some good examples of private companies taking the lead, but it is a matter for each private company in the country as well as for the publicly-owned industries to consider not only the contribution they can make to the well-being of the nation by a sustained programme of energy conservation but how much they themselves might profit by it. If there is any merit in the theory of private enterprise, we should see sustained energy conservation measures coming from the private sector. We on this side of the House shall watch with interest to see whether the private sector

does as well as the public sector and Government Departments in energy conservation.
The hon. Gentleman mentioned thermal efficiency in power stations. I am sorry if he feels that he has been snubbed when he has put Questions in Parliament to us, but I am sure he appreciates that the atmosphere at Question Time is sometimes a little different from the atmosphere in an Adjournment debate. If he feels that he is being snubbed from time to time, he is perhaps the author of his own misfortune.
The hon. Gentleman raises the serious point of thermal efficiency. He will know that the Energy Technology Support Unit was set up by the Department of Energy. It operates at Harwell and it is presently studying the transmission of energy over long distances for district heating purposes by means of piped hot water.
The Programmes Analysis Unit, which is the joint unit of the Department of industry and the United Kingdom Atomic Energy Authority, is studying various aspects of supplying processed heat to industry. The Energy Technology Support Unit at Harwell will report to the Department of Energy. The study should be complete within a few months. The Programmes Analysis Unit will support its report to the Atomic Energy Authority. We expect that the report will be complete by mid-summer.
In addition to that basic study, there are the five regional teams from electricity area boards and the CEGB. They have been established to consider specific schemes for district heating and heating for industry. It is too early to give any indication of the outcome of those studies, but I am sure the hon. Gentleman will be glad to know that they are under way.
A combined group on heat and power has been set up under the chairmanship of Dr. Marshall, the Chief Scientist at the Department. He is a very distinguished scientist and we are fortunate to have him working for us. Under his chairmanship the group will consider the economic role of combined heat and power and will identify obstacles to the fulfilment of that rô le. It will report initially to the Advisory Council on Research and Development and to the Advisory Council on Energy Conservation, which my


right hon. Friend the Secretary of State for industry recently established. The council hopes to have its report prepared by the end of the year. The question of publication will then be considered. The membership of the group is drawn from the electricity supply industry, the universities, engineering consultants, the British Gas Corporation and Government Departments.
Although there is not very much in the way of specific proposals on the table at the moment, we expect that such proposals will be coming along as the studies and working parties get on with their work. I hope that I have indicated that the Government are taking the problem seriously. We hope that we shall be able to announce something very soon.

Mr. Rost: I accept all that, but will the Minister at least give some assurance that no new power stations will be constructed unless the reports on combining heat and electricity are taken into account?

Mr. Smith: I cannot give an assurance on such a fundamental matter as that without a little more notice. I would have thought it elementary that, given the great need for new power stations, that aspect would be considered seriously. I cannot give an absolute assurance but I think that that is a matter which must be examined in any intelligent attempt to try to plan for the future.
I have indicated that on the very point the hon. Gentleman has raised—namely, thermal efficiency—a great deal of research and development is taking place. On energy conservation we have the great advantage of the assistance and advice of the Advisory Council on Energy Conservation, the value of which will become more apparent as its work increases. It is extremely important that the Department can refer various suggestions and ideas for detailed analysis to the council.
On energy conservation, we have to taken into account more than just the energy saving aspect of a certain idea. There are many good ideas which involve too much capital expenditure. A great deal of energy expenditure might be involved in creating a system which has been designed to save energy. We have to weigh up the competing priorities for Government expenditure. Many ideas appear to be good on the surface but

on closer analysis they may not appear to be quite as productive.
The need for energy conservation, which the hon. Gentleman has repeatedly and rightly stressed, is one which cannot be denied. We must bear in mind that in 1974 we paid £2,500 million more for 5 per cent. less oil than we imported in 1973. When we consider that fact, we see the great burden which this nation carries. We can draw some comfort from the fact that we have large reserves of indigenous fossil fuels in this country.

R. B. Cant: in the matter of research and development, is the Department of Energy taking any steps with the Department of the Environment in regard to the growing number of incinerators which are being built in this country and in which the amount of energy consumed is very great and the amount of heat wasted enormous? Cannot the Government draw on the experience of continental countries which use incinerators together with electric power stations to supply heat and other forms of energy to neighbouring townships? Is the Minister in contact with the British Steel Corporation which, through Dr. Finniston, uses old, redundant blast furnaces as high temperature incinerators and recycles glass and metal waste materials?

Mr. Smith: I do not know whether the Department of Energy is in direct contact with the Department of the Environment, together with the British Steel Corporation, but I shall look into my hon. Friend's suggestion. We find as we travel along the path of energy conservation that we constantly turn over new situations where serious wastes of energy occur. The more one examines the situation, the more clearly it is revealed that there are many examples of energy waste taking place throughout the country. The problem is that once a plant had been built, it is difficult to redesign or remodel it, and difficult economic decisions have to be taken. Therefore, the extent to which we give priority to energy conservation matters over other competing demands for public expenditure must be kept under review.
The whole theme of our energy conservation policy is that we cannot do everything in five minutes. We cannot call for extreme measures such as those


adopted, for different purposes, by the Conservative Government. This is a matter which must be examined in the long term over a period of four, five or even ten years rather than within a matter of months. We must try to change the habits of a lifetime. We need to change the outlook of people in their homes and those who work in industry. We must have a steady but evolving conservation programme.
We have been heartened by the interest shown by the House in the Government's efforts, even though criticisms are levelled at us. It is important that these matters should be aired constantly and that they are brought to public attention. We shall endeavour to evolve a conservation programme which is receptive to new ideas.
I referred earlier to our good fortune in having within our own land indigenous fossil resources. My hon. Friend the Member for Hemsworth referred to an

integrated fuel policy. We are nearer to that aim with our four-fuel policy, but we must remember that the resources of the North Sea in respect of oil and gas supplies, and even our coal resources, are finite. They can be used only once. Therefore, there is a great need for energy conservation.
These matters do not affect only our balance of payments problem but will affect our way of life for many years to come. Let us develop our indigenous fuel resources, but let us also bear in mind that we need to conserve energy at every step along the way.
I am grateful to the hon. Member for Derbyshire, South-East for having given the House an opportunity to conduct a thoroughly interesting debate on a most important national topic.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.